Sunday, February 19, 2012

Shut-up Stupid: “High” Gas Prices

I filled up my car yesterday at $3.45 a gallon. Doomsayers in the media are saying how this high price of gas is killing us. When Obama was elected gas was under $2 per gallon.

So lets look at the cost of gas.

First, The summer of '08 gas prices were pushing $5 per gallon. When the economy went into free fall, the oil market went with it.

As the economy improved gas quickly went back up to the $3 range and stayed there. If we had gone back to the same economic structure we had before the financial collapse gas prices would be in the $4 range again. Luckily our energy structure has changed.

In '08 the US imported two-thirds of the oil we consumed. Today it is only half. A small part of this is because we are still not up to full industrial capacity, but most of it is from small changes in our economic structure.

Cash for Clunkers, the push for home energy efficiency, research into alternative energy have all reduced the demand for oil. The US has bucked historic trends and has had economic activity increase while the demand for oil has decreased.

At the same time “drill, baby, drill' has been going full steam and US oil production actually increased for the first time since the '70s.

There is also a factor in oil prices that everyone who is forced to stare at oil prices everyday for years, like I did when I was Vice-President of an oil company, knows politics plays a factor in oil prices.

Oil speculators can influence the price of oil by 10 to 15%. It only takes a net of a few $100 million to swing the markets. In 2000 this was tried the price of gas started going up and Clinton released oil from the strategic reserve. Speculators lost millions.

In 2004 they did the opposite, oil prices were deflated until after the election.

In 2008 they inflated it again but the economy went in the crapper, so it didn't matter.

This year its being artificially raised again.

So the true price of gas is really just above $3 per gallon.

So to everyone in the media blaming Obama for $3 per gallon gas prices, I say, “Shut-up Stupid, you might be right that he had something to do with this price, but not the way you think. If he hadn't pushed for energy efficiency and research into alternative energy gas prices would be $4 per gallon. Around the same as during the Bush years. These higher prices would really hurt the recovery.”

By Darrell B. Nelson author of I KILLED THE MAN THAT WASN'T THERE

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