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Five Ways to Reduce the Cost of Gas

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Summer is nearing, and like clockwork, the media can't seem to go five minutes without talking about the extreme pain inflicted on consumers by higher gas prices. Shrill comments about how Bush should "do something" are a mainstay of any coverage. Recently, the candidates joined the fray.

Obama has come out strong against the gas tax holiday that is being touted by the other candidates, McCain and Clinton. He claims that the tax cut will only represent a meager savings of about 25 dollars a month, and in exchange cost over 300,000 jobs and a higher deficit. The media, in an effort to have something positive to say about their wunderkind, have fallen all over themselves agreeing that Obama is basically correct; sort of like the way a pre-school teacher encourages young pupils who have created Rorschach-like crayon art.

While there is some truth to what Obama is saying, he is wrong for condemning the gas tax holiday. Moreover, although Obama would never admit it in one of his inspirational speeches, the very platforms he supports have increased the cost of gas to Americans. If we really want to reduce the cost of gas, here are five ways to do it.

1) "Not much" is better than "nothing" – Obama is right that the average American wouldn't save much with a gas tax holiday. But they would save something. That's the point. There isn't much the government can do to lower the price of gas in the US quickly, considering global demand (where, in some parts of the world, gas prices make U.S. prices look cheap by comparison), lack of refineries, and price runs by the energy trading sector. The first and most immediate impact we can have on gas prices is to suspend the gas tax. No, 300,000 people won't lose their jobs, but yes, it will mean a slight increase in the government's budget deficit. In the current economic environment, this is a tradeoff we can and should make.

2) Say NO to more taxes on oil companies – Funny thing about windfall profit taxes on oil companies. Like all businesses, oil companies simply pass the cost of doing business onto the customer. You are the customer. When our politicians talk about increasing taxes on oil companies, this will mean an increase in the prices we pay for gas. Politicians don't like to admit this, but it's true.

There are two questions we must ask ourselves when this is the prescription: Will those higher tax rates directly reduce the cost of gas (and if so, how)?  Should those higher taxes actually result in an increase in taxes collected by the government (doubtful), how will that money be used to relieve the increased costs on consumers? The truthful answer is "No," and "It won't," respectively.

The fact is, oil company profits have not been out of line or a real windfall as described by the left. Nor has "big oil" contributed to the run up on gas prices. Oil prices have been run up because of higher global demand, a lack of refineries, and the way energy is traded on the market. Oil companies have been doing better in the last few years mainly because the worldwide demand for fuel has reached an all time high as more and more nations industrialize. We can continue to ignore this reality to our detriment, and one day we will find ourselves competing even harder (read, even higher prices) for the same oil resources that exist today. Which brings me to the next item:

3) Allow offshore/ANWR drilling – The US has vast oil reserves that continue to go untapped due to objections from the left. Both Obama and Clinton would likely continue a moratorium on drilling off the cost of the US (which expires in 2012), even though doing so would relieve at least some of our reliance on foreign oil. Democrats generally reject such ideas on environmental grounds, but provide no other options to address the real need for fuel in our growing economy, nor to answer the growing cost of that fuel (both in terms of dollars and continued strife in the Middle East) to Americans.

Environmentalism IS a concern, but there are ways to mitigate these concerns. Democrats could negotiate for higher environmental protections/programs in exchange for support of drilling. Democrats could reach a bi-partisan agreement that would reduce our dependency on middle east oil, increase our standards for protecting the environment and even put us on a path to wean ourselves off oil. But there has to be a discussion to get there. So far, any discussion on this issue has been taboo for the left. Meanwhile, you pay higher gas prices.

4) Build More Refineries – Believe it or not, it's not just the cost of crude that has increased gas prices. It's the lack of refineries to process crude into gasoline suitable for cars. Like offshore drilling, this is due to an environmental/NIMBY concern. That's all fine and good but we can't be upset at higher gas prices if we are unwilling to build facilities to create gas.

5) Fix the way energy is traded – like any market, the energy markets are open to manipulation by traders who have the resources to drive prices in a favorable direction for them. As a result, one of the reasons why gas prices continue to climb is due to market manipulation. The market for buying energy needs to be revamped to ensure that the prices for energy are not influenced by the manipulations of a few who have managed to "corner the market." This is a difficult task, and a difficult position for a person like me, who believes in a free market. But something needs to be done here.

Notice that I didn't talk about things like investing in green technology. The most popular, energy efficient car that is available today, the Toyota Prius, was not developed with help from the US government, in fact it was created by a Japanese company. Their investment in research and development created a product that not only helped the environment, but lowered the cost of gas for its owners. As a result, demand for the Prius continues to be extremely strong, paying Toyota back for their investment, as well as having the effect of reducing emissions and consumption of gas among Prius owners. Now, several other auto makers, including U.S. ones, have started following suit, offering similar products. All of this was accomplished WITHOUT increased CAFE standards or other draconian government regulations.

It's this type of self serving environmentalism, and not the self sacrificing type of environmentalism that the extreme left touts, that will reduce emissions and help make our society a truly greener one.

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About The Obnoxious American

  • Clavos

    Judging by the lack of comments here, gas obviously isn’t expensive enough yet.

    Hear that Arabs?

    Raise the price some more!!

    On to $200 a barrel!

  • The Obnoxious American

    Lack of comments because it’s hard to argue with this logic. Everyone knows what I am saying here is true, the faux populism of the left is just that, faux. Because their own policies have increased the cost of gas.

    To your point, Goldman Sachs recently said that oil will reach 200 a barrel. This would mean 8 dollar a gallon gas (or more). While that sounds shocking to us, in Europe that’s the going rate for gas. We need to start enacting the suggestions in the article soon before higher gas costs are as bad as the media makes them out to be.

  • http://theugliestamerican.blogspot.com Andy Marsh

    I do likethe fact that I didn’t read any of the bullshit about buying a car with better mileage and all that typical stuff that doesn’t save anyone any money. I remeber a while back reading where the rich folks on BC made that suggestion…buy a used car that gets good gas mileage…yeah, let me blow any savings I have so I can save money on gas…somehow that makes sense to people.

    For what it’s worth, I live 8.6 miles from where I work and I do ride my bicycle to work once a week. Granted, it has an electric motor and I don’t have to peddle all the time, but I do ride a bike to work once a week. It’s my smokers bike!

  • Clavos

    I’m all in favor of $200 a barrel oil; not because I want to pay more for gas, but because, unless our backs are against the wall, no one is going to initiate a real push to find a workable, renewable fuel source.

    So, bring it on; the sooner the better.

    Or we’re all going to be in something deep, and it won’t be fuel…

  • http://theugliestamerican.blogspot.com Andy Marsh

    Clavos – I’m gonna need a workaround for 2-stroke as well…make sure that happens…will ya?

  • Dan Miller

    Obnoxious,

    I agree with points 2 – 5. I disagree with point 1, which would do little if any good and might well delay implementation of points 2 – 5.

    Our beloved leaders love to apply purely cosmetic patches, because that makes them look good and takes the pressure off to consider solutions to the underlying problems.

    Perhaps Clav is right, and we need $200 per barrel oil and $8.00 per gallon gasoline to kick us in the ass. That will probably happen regardless of the implementation of points 2 – 5, because even if implemented today they would take years to affect the price of oil/gasoline. I hope that Clav is wrong, and that our beloved leaders will act to deal with the underlying problem now, but won’t hold my breath.

    Dan

  • http://drdreadful.blogspot.com Dr Dreadful

    Andy, what’s the topography like where you live and how long does the ride take you? I live a similar distance from my workplace and am thinking of doing the same thing.

    On the minus side, my bike doesn’t have a motor. On the plus, the city I live in is flatter than a gymnast’s chest.

  • http://theugliestamerican.blogspot.com Andy Marsh

    Doc – This is Tidewater…pretty flat around here. I’ve made the ride before and it’s usually fairly easy, like I said, I have an eBike…unfortunately, they stopped making them in the states a few years ago…when I did it last Friday the big issue was the wind. At my back on the way in, but really kicking in my face on the way home.

    The bike goes about 17 mph, they tell me that’s the legal limit in all 50 states for a motorized vehicle without a license or a helmet requirement. It takes about 40 minutes to make the ride. The other nice thing is that most of the ride is on an extra wide sidewalk that’s designated as a bike path, so I don’t have to worry about those folks that just don’t see small vehicles on the road when they’re driving.

    Wear hard soled shoes…they work better when you have to kick at a car door to get someones attention as they’re running you off the road.

  • http://drdreadful.blogspot.com Dr Dreadful

    Thanks, Andy. I may do a dry run this weekend just to see how long it takes. I start work early enough in the morning that I shouldn’t need to factor in much extra time for rush hour traffic.

    Of course, here in Fresno there are the trifling matters of smog and 115-degree summer temperatures to take into account…

  • The Obnoxious American

    “I agree with points 2 – 5. I disagree with point 1, which would do little if any good and might well delay implementation of points 2 – 5. ”

    As I stated in the article, even I agree the impacts of doing this are minimal. That said, since when has the discussion of ensuring the government has less of our money to spend a bad one?

  • http://theugliestamerican.blogspot.com Andy Marsh

    Doc – I’m the same way time wise…I leave for work around 6-6:30 in the morning. Now that it’s getting light a little earlier it’s not too bad. Nice and cool.

    We don’t get to many days in the 100’s here, but we do get 80-90% humidity in the summer, which can be just as bad if not worse than 115 degree heat.

    I lived in the Valley of the Sun for 4 years and honestly, I’d rather have the heat than the humidity! That’s where I was when I bought the bike. My daughters hate it. Whenever I said, let’s go for a bike ride, they hated the thought of trying to keep up with me. The bike even has an economy mode where it only goes about 12, but that was still to fast for them.

    The other really cool use it has is in the summer, when it’s about impossible to find a parking spot any where near the beach, I can drive down with the bike in the back of my pickup and park a pretty good ways away and then ride the rest of the way to the beach.

    LIke I said earlier, it’s called an eBike. It’s a 26″ bicycle with a 36 volt electric motor in the rear hub. It has a 7 speed shimano gear system and peddles like a regular bicycle. You can even peddle with the motor if you want…you know, take a little strain off it so to speak…if it wasn’t for the weight of the battery it wouldn’t weigh much more than a standard 26″ bike.

  • http://theugliestamerican.blogspot.com Andy Marsh

    OA – Don’t you know that by letting the govt take less of our money that’s less they’ll have to redistribute to those less fortunate than us??? WTF is wrong with you man???

  • Dan Miller

    Obnoxious,

    In comment 10, I think you may have missed the point I was trying to make. So, I will try again.

    I think that we agree that point 1 would be ineffective. My point was that by applying a band aid to a major wound, while ignoring the continued arterial bleeding and massive damage, and pretending that the major wound does not exist, the patient is hurt, not helped.

    That is what our glorious leaders normally prefer to do. They like to glow in the light of having done something perceived as good, particularly if keeps them from having to think about the real problems. That’s their behavior pattern, and I can’t think of any reason why it would not apply here.

    Dan

  • http://drdreadful.blogspot.com Dr Dreadful

    Obnox: I pulled up short a bit at your quote of $8 for a gallon of gas in Europe, but I checked and you’re about right. When I was last back home in December I remember it being about $6, although conversion is tricky because the prices advertised are per litre.

    My best friend visits the gas station infrequently, and usually only puts in the bare minimum he needs. And he’s not exactly poverty-stricken. It’s not an uncommon practice either.

    The high prices are chiefly because of taxes, which in Britain go up and up every time the Chancellor delivers his budget. The aim, at least partly, is to discourage people from using their cars, although you’d think successive governments would have learned by now that this isn’t going to have any effect on congestion if there’s no viable alternative, which there isn’t in many rural areas.

    It’s the same where I live. The population of the Fresno-Clovis urban area is getting on for 600,000 now, and still growing like crazy despite (or possibly because of) the recession. Yet there’s no public transit except for the bus, which is painfully slow (it once took me almost two hours to ride 9 miles home), doesn’t go where you need it to and stops running inconveniently early.

    Alternatives have been proposed, such as a monorail network and a perhaps more realistic rapid transit bus network.

    In the meantime, though, people run cars because they have to. Likewise, they will continue putting gas into them no matter what the price – because they have to.

  • The Obnoxious American

    Dan,

    I do agree that this is somewhat superficial. However, for people with less resources than me, saving 20-30 cents per gallon all of a sudden isn’t so superficial anymore.

    I find it comical that Obama can run around chastising the plan for a gas tax holiday as being meaningless. Meanwhile, back a few months ago, when people weren’t complaining about the price of gas, it was maybe 70 cents cheaper per gallon. Offsetting that 70 cent increase by 30 cents is a gimmick? Hmmmm. What was that PT Barnum was saying?

  • Condor

    I’m up a creek if the cost goes to 8 buck per gallon. In 2006 I was transferred to desk 60 miles from my last worksite (which was 15 miles). Well, we all know what the housing market is like…. couldn’t sell to relocate. Housing is still not moving, with more inventory on top of that. So I’m commuting 122 miles per day. I takes about an 1.5 hours each way.

    This is getting serious. Through out my career (in various locales), I’ve walked, bicycled, motorcycled, took a train, rode a subway or bus. Since 2003 I have had to rely on my car. Since public trans is practically non-existent, and the roads are unsafe for bicycle. Now with the 62 miles from house to work and going into year 3 of no sale on the home…. I might just have to pull the plug on a good organization for something that is not going to knock the wind out of my paycheck every month.

    Now, I can be optimistic and say… “well, it was just my time to move along” or “this is a message from the netherworld to shift direction” whatever…

    This is nothing of the sort. This “crises” is a result of protectionist policys against speculation, being lifted… which… guess what, now when someone farts in Africa the resulting malestrom over in this hemisphere is a large vortex (sucking sound) of speculation, designed to rid the consumer of ANY extra (expendable) income we might have been enjoying after many years of mediocre market performance.

    sigh…..

  • bliffle

    I find it comical that OA attacks Obama for rejecting the (illusory) 30 cent tax holiday while he never objects to the real dollars added to petrol cost by the oil monopolies.

    Where there is no real competition industry must be regulated or else it will simply raise prices as it pleases them.

  • Clavos

    And who, bliffle, will stop the camel jockeys from raising the price of crude?

    The ragheads make a hell of a lot more money on oil than the oilcos do.

  • AL

    Sure prices in Europe are higher than ours in comparison, and have been for years, however, that is not because of demand, but rather their government has an outlandish tax on fuel, to curb the fuel appetite. Doesn’t that sound like big government. Instead of allowing free market to come up with different fuels, lets just raise taxes so people won’t use them as much. Our price of $120+ per barrel is not as much about demand, as it is about speculative commodities trading. People have been betting the rising prices, causing the speculative market to rise. Basically high stakes gambling.
    Also, the price per barrel is for sweet crude oil, not sour. I live in SE Texas. Between Orange Texas, Beaumont, Houston to Galveston over to Victoria, you are talking about a large percentage of this countries gas and diesel processing plants. Most of them are not running at full capacity, and once more, very few of them process sweet crude… almost 100% of all the refineries and units in Texas are Sour Crude Refineries. In fact, that goes for the rest of the country. Sour Oil is cheaper than sweet, but our prices at the pump are based on sweet. We need to get traders out of the loop and allow an energy source like this to be direct, without the ability to manipulate the prices through trading.
    Also, we need Big Brother to back off and allow these other US companies and investors who are wanting to get into different fields of energy to get in. For example, we have enough coal in our country to replace our current demand for foreign oil for over 200 years. They have only a handful of coal liquification plants in the US, however, they can produce the same amount of gas and diesel for roughly $50 per barrel, and states like Montana (which is loaded with coal and is called the Saudi Arabia of Coal), is trying to open over 50 of these plants, which, now with new technology, produces less pollution, and cheaper gas, has been told by our congress that they are not allowed to do so without any real reasons. We need State leaders who will unite and take a stand against the Federal Demolishing team we have now, and tell them to Hell with their restrictions, that if they want to come after every state, GOOD LUCK, and start taking care of the their citizens and our country.

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