Posted by
GunsInTexas on Friday, June 08, 2007 3:33:02 PM
I feel like Andy Rooney.
I remember when I first began to drive. The absolute lowest price I ever saw for gas was 19 cents per gallon during what used to be called a “gas war” sometime in the late 1960’s.. Typically the price was more like 22 cents per gallon. But let us use 20 cents per gallon as a nice round figure.
Gas is running about $3.20 per gallon today. WOW! That sounds horrible! That is 16 times as high as it was about 40 years ago!
If you do the math (and I did) an increase of 16 x over a 40 year period means about a 7.2 % rate of increase per year. Huh? Yep, that is the amazing power of compound interest. But remember about 75 cents of that $3.20 is taxes. Take the taxes out and the rate of increase drops to 6.5 %. Hmmmmm.
Now I am not an economist, but doing some internet research, I calculated that the rate of inflation for the last 40 years is about 4.6 %. In comparison, the price of a first class stamp has risen at a 4.9 % rate and a Hershey candy bar has risen at a 7.6% rate. And let’s not even THINK about the cost of bottled water!
Remember that during that same 40 year period, all of these events have also happened:
1. The oil depletion allowance was eliminated by Congress. This used to be a tax break that acknowledged that there is a depleting amount of oil under the ground. No longer do the oil companies get this tax break.
2. OPEC was formed, meaning that the US and the oil companies have to deal with a political group of foreigners that set the price of crude.
3. My understanding is there has not been a new US refinery built in 35 years or so. I would suggest that our domestic use of petroleum has increased pretty dramatically over that period.
4. The EPA has forced dozens if not hundreds of designer gasoline blends on the oil companies. Gasoline made for use in Chicago won’t work in New York, for example. Remember Katrina? EPA regulations wouldn’t let gas from other areas of the country be shipped into the Southeast. Additionally, there are different blends for different seasons of the year! All this means that there are huge inefficiencies when the refiners have to switch from one to another.
5. How about the nationalization of oil company facilities in the Middle East, in Africa, and recently in Venezuela and I believe in Russia.
6. The environmentalists have worked as hard as possible to keep the oil IN the ground off the US coasts, in Alaska, etc. Additionally, they have WORKED to make gasoline as expensive as possible.
7. Don’t forget that you are paying something like 75 cents per gallon of taxes on a gallon of gasoline.
8. Let’s not forget the huge increases in use of oil around the world, especially in China and India.
9. Gasoline prices in the US are still ½ to 1/3 of what they are in Europe.
Now it seems to me, that taking all this into account, the price of gasoline is not so unreasonably high. In fact, it seems to me that the oil companies have worked pretty efficiently in keeping prices as low as they are today.
I am just glad that I do not have to drive my car on bottled water.