Monday, May 07, 2007

Gas prices

A lot of people are clamoring right now over gas prices.  Gas prices are at a record high at the pump- $3.07 per gallon. Americans ask, "Why are they so high?" 
Check out this post from Faithfully Liberal for an example of this.
The answers are simple.
First, we don't have enough refineries in the US to process the oil that has been extracted from the ground.  Oil prices are actually down from all time highs (currently $62/barrel down from $79).  So, we cannot turn the oil into gasoline fast enough.
But that begs a question which is the second and more important point.  Why can't we refine oil fast enough?  Because we use too much of it. 
The ultimate problem with gas prices is demand.  With 5% of the worlds population, the US demands about 25% of the world's energy.  This is not sustainable. 
Oil is, at least, a relatively finite resource.  If we do not begin to find ways to use less- from conservation to alternative energy sources- then we will continue to see rising gas prices, particularly as emerging economies (ie., India and China) demand more themselves.
I am unimpressed by American complaints about high gas prices, and will remain so, until I see evidence that the prices are actually causing Americans to change their behavior.  Right now, Americans are not driving less despite record high prices, and prices that have been high and rising for some time.
In the Pilgrim's view, gas prices are not yet high enough.  Only when the predictions of market economics are realized- when prices influence behavior- will they have reached the proper level.
In the meantime, get ready for $4 a gallon.

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