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| source: EIA from zFacts.com |
The free-marketeers will tell you the price of gasoline is determined by supply and demand, but the real truth is prices reflect more than just consumer demand or refinery supply. Prices are also affected by speculation and are influenced by geopolitics. The supply is mostly in the hands of Arabs who use their near monopoly to set supply to suit their particular policy goals (OPEC). Speculators play futures not to insure a supply, but to profit from market volatility. Refining costs play a role too as the switch is made to warm weather blends. Petroleum is 80% of the retail price of gasoline. Gas prices at the pump have
reached highs well before spring when they usually go up in time for increased consumer demand. Currently average US gasoline price is $3.61/gal. compared to last year's $3.22. Due to the rumors of war on Iran or destabilizing civil war in Syria, gas prices are expected to hit $4.00 before this summer. Right-wing politicians will make a convenient issue out of that development, and attempt to use consumer disgust as means of leveraging pro-oil legislation. A cut in supply from the Persian Gulf could send oil prices up by $20-50/bbl since a fifth of the world's supply passes through the Strait of Hormuz. Gas prices lag oil production, but
the correlation is not that close. Oil prices are much more volatile than gas prices as this six year chart shows.
The US is actually importing less oil thanks to reduced demand during the Great Recession or (whatever you want to call it) and increased domestic production. US demand for transportation fuels fell 7.1% in 2008, the steepest decline since 1950. Drilling the Earth into a stinking waste pit as the conservatives feel they have a god-given right to do will not solve the problem of America's oil addiction because the US uses about 19 million bbl/day according to the Energy Information Administration but only produces 7.5 million bbl/day in a 95mbbl/day market. Another Alaska at $126.00/bbl for oil would only save you a whopping 3¢/gal at the gasoline pump. If we stupidly decide to despoil the last vestiges of American wilderness or the last fishing grounds to extract oil, the Chinese will thank us so very much because by 2030 they will be importing 80% of their gasoline in a world market
[chart above]. Better to build excellent gas efficient vehicles right here in Mudville and tax the guzzlers, baby. You do not need a crystal ball to see the future:
