May 21, 2004
Hi. I got back from a Maui work trip yesterday, and I leave Sunday for another week in Ohio, so I thought I'd squeeze in a column.Have you gotten gas recently and felt like you were just pumping a bunch of money into your tank? Around my house, the prices were about $2.03 per gallon the last time I checked. In Hawaii, I saw prices mostly between $2.54 - $2.59. I was sadisdically amused at how fast the money amount ran up while the gallon meter didn't. I'm guessing that most people, like me, have thought it was due to a supply issue and that OPEC was trying to flex its muscles. That may have a little truth (I read they were trying to cut production a bit), but I've read several articles recently that demand is so great, supply just can't keep up. This article in The Economist does a pretty good job of briefing one on the facts. I've also read that the supply problem is largely due to the massive economic boom in oil-thirsty China.So what to do? It doesn't look like prices are going down anytime soon; rather I'm guessing other prices that are linked to the oil business will go up (think airline tickets and other transportation costs). Probably the best solution is to drive less or get a more efficient car. I too want the prices to come down, but since the US has prices much lower than much of the civilized world, I can't really complain too much yet. I guess we just keep dumping our wallet into the gas tank until we don't even notice it anymore.
Posted by charr at 4:45 PM
I think the whole gas price news story is silly. People freak out about it so they put it on the news every day. Newsweek just printed up how much it all adds up to as an increase for one year: only $250. A couple extra shopping trips at Target and you would spend that money anyways. (with avg. of $1.94 at the pump, 550 gallons a yr, would be $250 more for the year of 2004 than at 2003 prices). And the news NEVER mentions the astronomically higher prices people pay in Europe and other areas.
On the other hand, perhaps the perception that gas prices are so high will speed up R&D on more efficient engines and alternate fuel sources. There's a lot of great technology that's waiting in the wings for consumer demand to make it marketable.
It is honestly suprising that prices haven't always been rising - it's not a renewable resource. But deep sea drilling has tapped into even more and by God, if there's one thing people will do, it's use up a resource dry as long as the repercussions fall on another generation to deal with.There are people running diesel cars on a vegetable oil mixture which they make in the back yard for around $.60 a gallon. You won't see any oil company doing that because the profit margin isn't there. However, if there's anything more annoying than gas prices going up, it's editorials that say no one should complain about it because people in Europe pay more and IF gas prices had kept up with inflation, we'd be paying a lot more anyway. Well, guess what? Gas prices didn't keep up with inflation and we never have paid what Europe does. Not to mention that their cars are much smaller than what is sold here and their cities are less spread out so travel is not as extensive as it is here. It shouldn't surprise anyone that we complain a little when we are paying 25% more than we were 4 months ago. Gas prices haven't risen this much in nearly 25 years. Expect people to be a little frustrated. It's understandable.It would be delightful if this leads to more conservative choices in travel and auto purchases. I hope it does. But comparing our gas prices to other countries and hypothetic increases that never occurred before is an apples to oranges argument and therefore, weak.
Renee, while I agree it's not a perfect comparison (US vs Europe), there are many noteworthy facts. You're probably right that Europeans do travel less, but I'm also probably right when I say that their car sizes have a lot to do with the price of gas. If we were paying out the nose for gas, we'd likely stop buying the larger, less efficient vehicles. In fact, this is exactly how the Japanese really made it into the American Market -- back in the late '70s when OPEC shot up their prices. A recent study showed that the price of gas in 1981 would be about $2.93 in today's money. People turned away from the big boats and bought Datsuns and Hondas and Toyotas. The same would likely happen here, given enough time and pain.That said, I also would like some viable alternative fuels, but there's nothing available yet that suits me.
I think that measuring the price of something relative to inflation is a good indicator of how that particular market is thriving. It's a good indicator of consumption. It's a good indicator of efficiency and productivity. It's also an indicator of how much people have to pay for necessary expenses, relatively speaking. And like it or not, cars are a necessity.When gas prices are compared relative to inflation, it's a way to put the price into perspective. Yes, a 25% increase over 4 months is not good. But the point is that it could have been much worse. We should be thankful that we had low gas prices as long as we did. Also, I think it's an effort to calm consumers. After all, a panicked consumer is a dangerous thing to the economy.A big problem with the price of gas is that oil refineries have to make so many different blends to keep up with different state regulations. If we could all agree on maybe two or three, it wouldn't cost so much to refine oil and the savings would be passed down to us. Added to that is the fact that the US hasn't opened a refinery since the 70s. And we don't drill for oil where we could (Alaska for example). Before I'm misunderstood: I'm not saying that we should use oil as if it's inexhaustible or that we should wreck the environment. I'm saying that while we develop new technologies to replace the ones that are dependant on oil use, we should find other sources for our oil. And we should find other sources in an ecologically friendly manner.
...same topic lighter take...I read an article recently that said as much as people (referring to in the Northeast) gripe and complain about gas princes being over $2.00 "we" think nothing of spending $3.50+ 1 or more times a day on designer coffees! I guess it is all where one's priorities lie....I thought it was an interesting comparison