Thursday, August 19, 2004

Oil and Gas prices. OK there is going to be a lot of talk about high gas prices and how much the oil companies are gouging the consumers and what effect this will have on Bush's re-election chances in the next couple of months. Some people are confused as to why when oil prices are still high then why are gas prices falling at the moment. That's not too hard to explain when you look at the inventory of petrolium sitting around and oil companies trying to build a reserve of cash, by using a higher than usual profit margin, in case there is some sort of middle east, or Russian, or Venezuelan catastrophy.
Willamette week's (Portland local paper) headline story this week is about how all the evil oil companies are trying to stamp out competition and make deals with each other to get the greatest profit margin. The reason that oil prices are dropping is that consumers will alter their behavior eventually due to the higher prices and hurt the oil companies in the long run, so market to control themselves to a certain extent. WW's acusation is that gas prices could be even lower if certain dubious, but legal, methods of the oil companies were discouraged.
The problem with all that is that gas prices, as they relate to the spending power of consumers in 2004 dollars, are as cheep as they've every been. People just drive more and the gas bill takes up more of their paycheck. As late as 1999 the price of gas was 1.27 per gallon as opposed to 1919 when (in 2004 dollars) the price was 2.75 a gallon and in 1959 when it was 1.96 per gallon.
So who's taking the hit here? WW seems to insist that it's the local gas station operator, muscled by the major oil companies. You decide.
Really when I see a relatively liberal (but generally thoughtfull) paper complain about gas prices I would think they would be cheering for higher prices, as there is a threshold where consumers will begin to demand cars and other technology, which in some cases is already there, that consumes less oil. The technology is there for cars, but Americans tend to turn a blind eye to that in favor of more power and bigger vehicles.
Greg Easterbrook, of the New Republic, has been on this for a while now. His biggest grip, besides SUVs, is politicians and movie stars who spend lots of time talking about how bad SUVs are for the environment only to get into their private jets and scurry about the country sucking more petrolium than 1000 Hummers. I can't find the links at the moment though. I'll update this if I do.

No comments: