I just returned from a 13-day trip to Ocracoke Island and Myrtle Beach. While the destinations and itinerary of that trip will be the subject of future posts, my current interest is my observations on the ongoing debate over the soaring price of fuel.
In January of this year unleaded regular gasoline cost an average of $3.085/gallon and we all were crying the blues. Now, four and a half months later, the average price of a gallon of unleaded regular in Florida is $3.814, an increase of 23.6%. Annualized that’s an increase of 62.9%.
That hurts everyone and affects every part of our economy from food to transportation, from stock prices to entertainment; everything we do is connected in some way to the cost of fuel and crude oil.
The burning question on most people’s minds is, “who is to blame?” The media and the Democrat party will tell you its “big oil” and the Bush administration who are at fault. Most people go along with that assessment because it makes a neat little package and easy to understand.
I find it interesting that when asked a hard question, liberals (i.e. Democrats) will counter that the answer is not so simple, nuanced with many variables that must be addressed for one to understand their answer. But when it comes to the price of fuel, they simply pin the blame on “big oil” and the current administration.
But is it really so simple, and is the fix so simple as well?
They want to divert the deposits into the Strategic Petroleum Reserve to the marketplace for the rest of the year and eliminate the federal gas tax for 15 weeks during the upcoming summer driving months. Sounds good, but will it really make a serious impact?
The Strategic Petroleum Reserve (SPR) amounts to 70,000 barrels per day, about one tenth of one percent of world consumption and 0.0056% (that’s just over one half of one percent) of daily US imports.
If the SPR were full and we were to be cut off from the world oil supply, there would be only about 58 days of reserve before we would need to drastically cut back on consumption. In practice though, we would need to make those drastic cutbacks immediately.
The US is dependent on foreign crude oil for 60% of its consumption, the largest portion of which is refined into gasoline (9.253 million bpd). However, if the 12,000,000 barrels per day we import was interrupted not only would fuel supply be scarce, but manufacturing of most goods would grind to a halt.
Not only is crude used to make plastics, which permeate every part of our economy, but the machines which produce them and make every item we produce more affordable would stop for lack of lubrication and maintenance parts.
But returning to the immediate issue of the price of gasoline and the effect of the congressional and administrations band-aid approach. It’s estimated that diverting the SPR to domestic production will result in a reduction of about .03 - .05¢ gallon. That works out to about $53 in savings over 6 months of the diversion. Excited?
The moratorium on the 18.4¢ federal gas tax will save motorists an estimated $28 - $30 on average over its limited lifespan and in the process reduce available revenue for highway maintenance by $6.4 billion, affecting 10’s of 1000’s of highway related jobs.
So for the sake of saying they did something, our congressmen/women and the administration are going to save you about 83 bucks, expose a weakness in our national security, expose motorists to unsafe roads as they go unmaintained and throw thousands of highway workers into the unemployment lines.
In the end, who's gonna notice anyway? In 38 days at the current rate of increase the pump price of gasoline will be right back where it was before the "cuts" took place. At the end of the summer when the "tax holiday" ends and the price suddenly rises 18.4¢, do you really think the American people will remember they've been enjoying the largess of the US Congress for 3 months?
Sounds like a great plan to me.
My next post will include some of my ideas on what we should do to deal with this problem and the wider issue of the US energy supply.
"We are all in the same boat on a stormy sea and
we owe each other a terrible loyalty." - G. K. Chesterson
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