posted on Sep, 22 2005 @ 11:38 AM
Having just dipped below $3/gallon, we can expect gasoline prices to spike again, given that Hurricane Rita has already forced the closure of Texas
oil platforms and refineries, and there may be some actual destruction in Rita’s aftermath.
And we can expect further fluctuations in gasoline prices, along with the long lines, gas station outages, howls of “price fixing”, and all around
bad times in the marketplace, especially at the retail level.
It won’t take much; every tropical depression that makes the jump to hurricane; every hint of a tsunami, and any other natural disaster will send
out a signal for the futures market to hiccup, oil prices to inch up, and an immediate spike as the wholesalers raise their prices not based on how
much they paid for their oil, but based on how much they guess it will cost for the next shipment. Reacting to a volatile climate and weather
will give us volatile prices for weather- and climate-dependent commodities – every time.
And the fallout from natural disasters isn’t half of what we can expect from the volatility of the politico-economic activities in every corner of
the world. I’m sure most of you know that we’re dependent on the bulk of our imports from countries whose people and leaders don’t like us at
all, and are more than happy to raise prices simply to make a political statement. It’s been this way in the Near East since 1974, when OPEC first
realized its political power which led to the Embargo that year. And I’m sure that many of you know about the political climate in Venezuela and
Nigeria, given the antics of Hugo Chavez and Alhaji Dokubo-Asari.
The bottom line is that we are going to continue to have these destructive spikes in oil prices as long as there are natural forces -- and as long as
we tie our addiction to foreign thugs. How do we manage to fix the problem?
I think the answer is simple. Forget about the price of gasoline. Determine the cost of gasoline and figure out a way to lower
the cost or else pay the price we should be paying to cover the cost – probably around US $4.50 to $5/gallon.
Let’s look at the cost of gasoline. There’s the amount we pay the people who own the oil, to cost to transport it to the United States,
the cost to refine it, to cost to transport the refined gasoline and diesel to the service stations, and a profit markup at every step of the way.
But that’s only the beginning. The millions of people and critters that are sickened by the pollution caused by cars and trucks burning that oil,
the wasted time caused by traffic gridlock, the probable hazards caused by global warming and its spin-offs – Katrina and Rita, anyone? – and the
most insidious costs of all: A huge defense budget as the search for ‘safe’ oil drives our foreign policy down the road to eco-imperialism, with
the deaths and maiming of hundreds of thousands of American and foreign soldiers and civilians only the tip of the cost-iceberg!
The $3 we’re paying right now for gasoline covers the costs of producing, transporting, and refining the petroleum and a hefty profit at almost all
levels of commerce. But it doesn’t pay for the pollution and the global warming and an imperialist foreign policy. The only way we can do that is
to impose a hefty tax to cover those real costs – about $1 to $150 a gallon comes to mind.
The down side, of course, is obvious. We’d be paying twenty- to thirty bucks a week more (depending on what and how much we drive) for fuel. And
the price of just about everything else we purchased would go up a couple of percent, too, since grocery prices are driven by how much it costs to run
the combines that harvest them and the tractor-trailers which bring the veggies to the local supermarket.
But the up-sides would outweigh the downsides by a huge margin. First, the cost would be painful enough to make people cut back on driving, but not
so painful as to destroy them. Second, it would put a real force on the automobile manufacturers to get serious about mileage, the same way the
embargo of 1974 gave Honda and Toyota their first toehold in the American market. Third, it would make domestic oil a better bargain, minimizing the
problems inherent in our present approach of using foreign thugs as our petroleum drug dealers. Fourth, a lessening demand would probably exert
downward pressure on prices. Fifth, it would lessen our perceived need to be involved in the affairs of theses selfsame thugs we deal with now, which
would lesson the cost and pain of military actions around the world. Finally, the lowering of usage and the tax itself would be invaluable to offset
the problems with the environment caused by profligate use of oil and no assets available to clean our own fouled nest up.
Nothing will solve the problems we face until we completely wean ourselves from hydrocarbon energy. But until we find the right mix of safe and clean
energy, a high gas tax and the fuel economy it would drive is a great way to start.