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Wednesday, March 9, 2011

Knee Jerks And Plain Old Fashioned Jerks

Virtually everyone has been talking about it, if not grumbling about it for a while now - and we have to count ourselves among that group.

"It" of course is the price of gasoline, and it's not going to get better any time soon.

We're not sure everyone understands completely the economic relationships involved between what you pay at the pump and what's going on in the world. We thought we'd give a quick breakdown to you today, and help you to understand exactly which oily person or group is sticking it to you as you fuel up today.

For starters, the price you pay at the pump has significantly less to do with factors like the uprisings in Libya or Egypt, or how much it costs the oil companies to pump oil from a deep sea well versus one that's just off shore in Alaska.

In fact, according to the U.S. Department of Energy, the five biggest importers to the U.S. are Canada, Mexico, Saudi Arabia, Nigeria, and Venezuela. The U.S. continues to have solid relationships with both Canada and Mexico, and has a long-term - if not odd - relationship with Saudi Arabia. The U.S. also enjoys a stable relationship with Nigeria, and a relatively stable - if not always friendly - relationship with Venezuela.

In short, world instability - or distance - isn't why we're paying more.

The price of a gallon of gas has little to do with supply, either. Yes, India and China are using more oil and more petroleum-based products. But many of their major suppliers aren't the same as ours. The real cause of price increases at the pump have so little to do with the supply of our oil that opening the U.S. Petroleum Reserves really wouldn't do a thing to help - and might even hurt - the price we're paying when we fill up our vehicles.

The largest single reason the price of a barrel of oil is going through the roof - as reporter Johnathon Fahey touched on in the Washington Post on Monday (too gently, in our opinion) -  is the speculators. In other words, the usual group of Wall Street gamblers is screwing things up for the rest of us again. We saw this same game played by these jerks in 2008, when oil prices spiked near $150/barrel, right before the bottom fell out of the economy.

In answer to your unasked questions, yes; the Administration DID recently attempt to put curbs back on speculators through the new CFTC. And yes, Wall Street has tried to fight those restrictions which likely would have led to the re-regulation of the energy trading industry, and probably lower prices at the pump. Those two things being said, it remains true that the energy trading industry is basically unregulated, which means higher gas prices for us all.

Now, we're not saying the guy or gal running the Quick-E-Mart down on the corner near your house may not be partially to blame. Both our Lincoln and Washington, DC locations are in the top 15 highest margin cities in the U.S. where retailers can sell gas. Some retailers, fearing the speculators will get crazy and bet their wad all at once have indeed jumped to knee-jerk price increases lately. To them, we can only say, your time will come.

To everyone else, we simply note, as we have from time to time previously, the single biggest fight our nation faces over the next 50 years won't be water (we have oceans on both sides of the country, and plenty of lakes in between). It won't even be a fight with another country.

The fight we face is with ourselves, to break our collective addiction to oil.

It will take more than a simple kick in the pants to get us past that battle.