The Wasatch Behind: Reducing the price of gas
"Holy cow," Uncle Spud sputtered with no small measure of disgust. "It just cost me 70 bucks to gas up old Paint, my pickup truck."
"Yes, I know," I said with real compassion. "The average cost of a gallon of regular gasoline is now $3.60 per gallon."
"Why doesn't the government do something about it?" he asked. "The cost of fuel is beginning to affect the cost of everything."
"Oh they will," I promised him. "All we've got to do is elect a new batch of politicians and they promise to fix things right up."
"What's the plan?"
"Well, Hillary and McCain both say they want to stop collecting the federal gas tax for a few months this summer so families can go on vacation."
"How much will that save on a gallon of gas?" he asked.
"About 18 cents."
"Eighteen cents from $3.60 still means gas will cost $3.42. I don't think that will make much of a difference. We need gas under two dollars for me to afford a vacation."
"Hillary also says she'll 'take' the profits from the big oil companies to help things out," I offered.
"Wait a minute. Isn't making a profit the thing that keeps big oil companies in business?"
"So why would she want to take away their incentive for doing business? Heaven knows we need all of the oil and gas we can get," he said.
"She seems to think the government can do a better job of spending the oil company profits than those greedy corporate managers," I said. "But I think the real plan is to take all of the profit out of a gallon of fuel to bring the price down even more."
"How much would that reduce the cost?"
"About 7.5 percent according to the oil executives," I said. "That'll reduce the price by another 27 cents. On top of the federal tax cut, that'll bring the price down to about $3.15 per gallon.
"What else could we do?"
"If we could get the state of Utah to eliminate their gas tax, we could get the price down another 43 cents. That would put it down to about $2.72 per gallon. And if we could get service stations to provide gas at cost, as a public service, we might get a gallon down to about $2.50. That seems to be the base price after we take all of the profit and taxes out of a gallon of gas. But then, we all know the feds and the state can't maintain roads without the fuel taxes. So if we did eliminate the gas tax permanently, it might cost $1000 to register your car every year. They've got to get the money somewhere."
"So how do we get the price down to where we can afford gas?" he asked.
"We can't." I explained. "The high price is built into the commodity. We've created that monster with government policies over the past 40 years. Price is always linked to supply and demand and we've created an artificial shortage in this country by not developing our resources or making any new refineries. In spite of having as much oil as Saudi Arabia, we have to buy fuel on the world market and pay whatever OPEC dictates. And they are not our friends."
"Why haven't we been developing our natural resources?"
"We traded cheap gas for man-made wilderness and happy caribou in far away places like ANWR," I reminded him. "And we can't mine coal to make gas because it damages cryptobiotic soil. And if you've bought food lately, you can see the results of switching to ethanol. The price of food is going through the roof."
"So what can we do?"
"Not much at this point. If we start today it might take 10 years to get oil out of ANWR or off the continental shelves. Oil shale and coal gasification will take several years to get up to speed before they can make a difference. And any meaningful fuel alternatives are still 10 to 20 years out. I guess we're stuck with $4, $5, or $10 dollar gasoline for the next several years. But I'm sure congress and the Sierra Club feel our pain, if that's any consolation.
"But all that wilderness we saved sure is pretty, isn't it?" he said.
"I don't remember," I confessed. "I can't afford to go there anymore."