Energy Options of Oil, Gas and Coal
http://www.slate.com/id/2191491/
Gasoline Is Cheap
Four dollars a gallon is outrageous! We should be paying much more.
By Robert Bryce
Posted Thursday, May 15, 2008, at 3:24 PM ET
The next time you have to take out a loan just to fill up your tank, remember this: Four-dollar-per-gallon gasoline
is cheap.
There's no doubt that high fuel prices are hurting low-income consumers, and high energy costs are placing a tax
on the economy that is slowing investment while sending billions of dollars overseas. It's unsurprising that
presidential candidates and members of Congress issue new proposals practically every day to lower gas prices:
Stop filling the Strategic Petroleum Reserve! Suspend the federal gas tax! Open ANWR to oil drilling!
These proposals are delusions, and Americans are living in a fantasy land when it comes to energy and energy
prices. Over the past few years, consumers have been inundated with news stories about the soaring price of
gasoline. Invariably, these stories include comments from a motorist who is outraged at the evils of a) Saudi
Arabia, b) OPEC, c) Big Oil, d) all of the above.
But by almost any measure, gasoline is still cheap. In fact, it has probably been far too cheap for far too long. The
recent price increases are only beginning to reflect its real value.
When measured on an inflation-adjusted basis, the current price of gasoline is only slightly higher than it was in
1922. According to the Energy Information Administration, in 1922, gasoline cost the current-day equivalent of
$3.11. Today, according to the EIA, gasoline is selling for about $3.77 per gallon, only about 20 percent more than
86 years ago.
Given the ever-increasing global demand for oil products—during the first quarter of this year, China's oil
consumption jumped by 16.5 percent—and the increasing costs associated with finding, producing, and refining
crude oil, it makes sense that today's motorists are paying more for their motor fuel than their grandparents and
great-grandparents did.
Gasoline is also a fairly minor expense when you consider the overall cost of car ownership. In 1975, gasoline
made up 33.4 percent of the total cost of owning and operating a car. By 2006, according to the Bureau of
Transportation Statistics, gasoline costs had declined to just 17.1 percent of the total cost of car ownership. Of
course, fuel costs have risen by about $1 per gallon since 2006, but even with those increases, fuel continues to be a
relatively small part of the cost of car ownership. By contrast, the fixed costs of ownership—insurance, licensing,
taxes, and financing—have increased nearly fivefold since 1975. Maintenance costs have also quintupled over the
same time period. Given those increases and the relatively low price of fuel, it's not surprising that Americans are
opting for big vehicles with powerful engines. Considering the overall cost of owning a vehicle, fuel expenses just
aren't a very big deal.
History shows that significant declines in U.S. oil consumption occur only after prolonged periods of high prices.
Over the last two decades, U.S. consumers have been spoiled by low fuel prices. And those lower prices led to a
buying binge that put millions of giant SUVs, pickups, and other gas guzzlers on our roads. Today's higher prices
are forcing consumers to adapt. The EIA now expects U.S. gasoline consumption to decline this year—the first
drop in demand in 17 years. In April, sales of small cars in the United States were up by 17 percent over the same
period a year earlier while sales of SUVs, trucks, and large cars all fell by about 30 percent.
On the environmental front, people concerned about greenhouse-gas emissions should be cheering today's oil
prices. Expensive motor fuel is the only thing that will lead consumers to use less oil and make the switch to
hybrid vehicles, smaller cars, and public transit. Higher oil prices are convincing automakers to change their fleets.
Earlier this week, Nissan Motor Company announced that it will begin selling an electric car in the United States
and Japan by 2010. Carlos Ghosn, the chief executive of Nissan, made it clear that fuel prices were a factor in the
company's decision to build electric cars, telling the New York Times that "the shifts coming from the markets are
more powerful than what regulators are doing."
American gasoline is also dirt-cheap compared with gas in other countries. British motorists are currently paying
about $8.38 per gallon for gasoline. In Norway, a major oil exporter, drivers are paying $8.73. In 2007, out of the
32 industrialized countries surveyed by the International Energy Agency, only one (Mexico) had cheaper gasoline
than the United States. Last year, drivers in Turkey were paying three times as much for their gasoline as
Americans were. The IEA data also show that in India—where the per capita gross domestic product is about
$2,700 (about 6 percent of the per capita GDP in the United States)—drivers have been paying more for their diesel
fuel and gasoline than their American counterparts.
(Gasoline is also cheap compared with other essential fuels. A Starbucks venti latte costs the equivalent of $23 per
gallon, while Budweiser beer runs $11 per gallon.)
The simple truth is that Americans are going to have to get used to more expensive gasoline. And while they may
continue grumbling at the pump, they need to accept the fact that even at $3.50 or $4 per gallon, the fuel they are
buying is still a bargain.
Robert Bryce is the managing editor of Energy Tribune. His latest book is Gusher of Lies: The Dangerous Delusions
of "Energy Independence."
Next
http://www.slate.com/id/2191491/
Gasoline Is Cheap
Four dollars a gallon is outrageous! We should be paying much more.
By Robert Bryce
Posted Thursday, May 15, 2008, at 3:24 PM ET
The next time you have to take out a loan just to fill up your tank, remember this: Four-dollar-per-gallon gasoline
is cheap.
There's no doubt that high fuel prices are hurting low-income consumers, and high energy costs are placing a tax
on the economy that is slowing investment while sending billions of dollars overseas. It's unsurprising that
presidential candidates and members of Congress issue new proposals practically every day to lower gas prices:
Stop filling the Strategic Petroleum Reserve! Suspend the federal gas tax! Open ANWR to oil drilling!
These proposals are delusions, and Americans are living in a fantasy land when it comes to energy and energy
prices. Over the past few years, consumers have been inundated with news stories about the soaring price of
gasoline. Invariably, these stories include comments from a motorist who is outraged at the evils of a) Saudi
Arabia, b) OPEC, c) Big Oil, d) all of the above.
But by almost any measure, gasoline is still cheap. In fact, it has probably been far too cheap for far too long. The
recent price increases are only beginning to reflect its real value.
When measured on an inflation-adjusted basis, the current price of gasoline is only slightly higher than it was in
1922. According to the Energy Information Administration, in 1922, gasoline cost the current-day equivalent of
$3.11. Today, according to the EIA, gasoline is selling for about $3.77 per gallon, only about 20 percent more than
86 years ago.
Given the ever-increasing global demand for oil products—during the first quarter of this year, China's oil
consumption jumped by 16.5 percent—and the increasing costs associated with finding, producing, and refining
crude oil, it makes sense that today's motorists are paying more for their motor fuel than their grandparents and
great-grandparents did.
Gasoline is also a fairly minor expense when you consider the overall cost of car ownership. In 1975, gasoline
made up 33.4 percent of the total cost of owning and operating a car. By 2006, according to the Bureau of
Transportation Statistics, gasoline costs had declined to just 17.1 percent of the total cost of car ownership. Of
course, fuel costs have risen by about $1 per gallon since 2006, but even with those increases, fuel continues to be a
relatively small part of the cost of car ownership. By contrast, the fixed costs of ownership—insurance, licensing,
taxes, and financing—have increased nearly fivefold since 1975. Maintenance costs have also quintupled over the
same time period. Given those increases and the relatively low price of fuel, it's not surprising that Americans are
opting for big vehicles with powerful engines. Considering the overall cost of owning a vehicle, fuel expenses just
aren't a very big deal.
History shows that significant declines in U.S. oil consumption occur only after prolonged periods of high prices.
Over the last two decades, U.S. consumers have been spoiled by low fuel prices. And those lower prices led to a
buying binge that put millions of giant SUVs, pickups, and other gas guzzlers on our roads. Today's higher prices
are forcing consumers to adapt. The EIA now expects U.S. gasoline consumption to decline this year—the first
drop in demand in 17 years. In April, sales of small cars in the United States were up by 17 percent over the same
period a year earlier while sales of SUVs, trucks, and large cars all fell by about 30 percent.
On the environmental front, people concerned about greenhouse-gas emissions should be cheering today's oil
prices. Expensive motor fuel is the only thing that will lead consumers to use less oil and make the switch to
hybrid vehicles, smaller cars, and public transit. Higher oil prices are convincing automakers to change their fleets.
Earlier this week, Nissan Motor Company announced that it will begin selling an electric car in the United States
and Japan by 2010. Carlos Ghosn, the chief executive of Nissan, made it clear that fuel prices were a factor in the
company's decision to build electric cars, telling the New York Times that "the shifts coming from the markets are
more powerful than what regulators are doing."
American gasoline is also dirt-cheap compared with gas in other countries. British motorists are currently paying
about $8.38 per gallon for gasoline. In Norway, a major oil exporter, drivers are paying $8.73. In 2007, out of the
32 industrialized countries surveyed by the International Energy Agency, only one (Mexico) had cheaper gasoline
than the United States. Last year, drivers in Turkey were paying three times as much for their gasoline as
Americans were. The IEA data also show that in India—where the per capita gross domestic product is about
$2,700 (about 6 percent of the per capita GDP in the United States)—drivers have been paying more for their diesel
fuel and gasoline than their American counterparts.
(Gasoline is also cheap compared with other essential fuels. A Starbucks venti latte costs the equivalent of $23 per
gallon, while Budweiser beer runs $11 per gallon.)
The simple truth is that Americans are going to have to get used to more expensive gasoline. And while they may
continue grumbling at the pump, they need to accept the fact that even at $3.50 or $4 per gallon, the fuel they are
buying is still a bargain.
Robert Bryce is the managing editor of Energy Tribune. His latest book is Gusher of Lies: The Dangerous Delusions
of "Energy Independence."
Next
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