Friday, July 8, 2011

Critical Thinking and Gasoline Prices

How many people who complain about high gasoline prices behave in a way counterproductive to their own interests?  There are many factors involved.

After a fill up, do they drive away with the same lead-foot, racing to the next red light, changing lanes to pass the car that isn’t moving quite fast enough, just to apply the brakes a few seconds later?  This waste costs us all, because it drives up demand for gasoline, resulting in higher prices.

Do they continue to contribute to organizations that resist and obstruct efforts to build new oil refineries in the US?  Many of these organizations represent themselves as aware and caring, showing pictures of distressed whales and polar bears to tap an emotional response.  But when they step forward in the name of clean air and clean water to erect roadblocks to the process moving petroleum products from the well to the pump, they impede supply, and drive prices higher.  Of course conservation, clean air and clean water are important, but perspective reminds us that there are limits to everything.  Waste is bad and we should make every effort to use resources wisely, but saving every tree or polar bear on the planet is not only impossible, but foolish.  Currently most of America’s refining capacity is concentrated near the Gulf Coast where one good storm can disrupt our supply, so when construction in other regions is blocked, one possible solution to the problem of high prices is eliminated.

Do they continue to support politicians who believe that there is less danger of leakage and pollution drilling in the Middle East and shipping oil across the ocean in tankers than be drilling in Alaska or Montana and shipping it only hundreds of miles instead?  (Some politicians argue that approval of domestic drilling today does no good since it takes 7-10 years for it to pay off, but that’s what they were saying ten years ago!)  Just the prospect of additional sources would push prices down due to speculation about future oil prices.

Some people blame a Big Oil conspiracy for high prices, but how high must prices go before alternatives become more attractive?  Is it in the interest of the oil companies to artificially set prices high enough to let these upstart new technologies get an economic foothold?

There are many other factors involved in high gasoline prices including global demand and the strength of the dollar.  We should think it through and not accept one-sided solutions.

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