Gas is so high

First, let me say I live in Alabama, so my gas prices don't even begin to compare with people in California and Illinois are paying. However, man...are gas prices high or what? $1.64/gallon down here...9 cents below the national average of $1.73. I was reading this article where the AG of Florida is "not satisfied" with the answers he got from oil company executives about the high prices. There are probably lots of other people who would like a rational explanation as well.

First, before we begin, it is crucial to understand the Econ 101 concept known as the "Law of Supply and Demand." For those of you who are products of government education, you may need to read this tutorial first (if you actually graduated knowing how to read).

Now, let's actually look at some facts. First, according to this graph gas prices are really still better today than they were in the late 70s/early 80s. Sure, if you compare just the dollar amounts (avg. $1.45 in 1981 to $1.73 today) we are paying a higher amount. But, when you actually adjust today's price (i.e., remove the 23 years of inflation), you will notice we would be paying an average of $0.60 cents in 1980. ..or if you go the other way... we would be about $2.40. I think you would agree that any record must account for inflation to be a legitimate comparison.

So, since we have busted the myth that "Gas prices have reached an all-time high," let's discuss why gas prices are increasing. There are several factors that account for that...most caused by Watermelon (the perfect metaphor to describe the Green Party with its deeply Marxist philosophy hidden underneath a thin environmentalism facade), busy bodies. As I have said in the past, "There are no solutions, only tradeoffs." Our so called environmental activist seem to have forgotten this axiom of life.

See, there hasn't been a new oil refinery built in the United States since 1979 (lasts paragraph of article). The NIMBY mindset along with punitive environmental laws keep new refineries from being built. The situation is even more stark. In 1982 there were about 260 refineries in the US. Today there are about 160 according to this table provided by the Dept. of Energy. This makes it tough to meet demand. When demand exceeds supply, then prices go up. Now, in theory, the increased prices help the suppliers to spend more to meet the demand. However, in this case, the anti-capitalistic environmental types prevent the suppliers from creating the resources to meet the demand (i.e., build more refineries) or they make it too expensive to justify the cost (i.e., the prevent upgrading existing equipment).

Most people don't realize that when a new environmental law gets written, many times companies are "grandfathered in," allowing the company to operate under the old law until they build a new plant or upgrade an existing plant. The cost to upgrade with the increased price to meet the more stringent pollution requirements makes it less appealing to upgrade existing equipment. Technology would allow less refineries to make more gas. However, that technology does not allow for the pollution requirements to be met cheaply. Now the new equipment does make less pollution than the old equipment...it just doesn't reach the artificially set standards set by law. So instead of having more gas and less pollution, the companies maintain old equipment that actually produce less gas and more pollution than if they would be allowed to upgrade. But the Watermelons don't really care about the environment or mankind so much as they care about destroying the capitalist and the individual. However, that is a topic for another day.

Besides the refineries, we also have the problem with "special blends." Some cities/states have mandated that only gas that is mixed or created a certain way is allowed to be sold in that city. This means when those cities gas supplies begin to run low, that our already stressed out refineries have to shut down, re-tool for that blend, and then manufacture it. Now, while they are creating a supply for that city, they are not creating a supply for everybody else. After an adequate reserve for a single city has been established, the refinery shuts down again, retools back to the normal blend, and begins creating gas for everyone else. BTW, the blends are more expensive and some cities blends are not compatibles with other city blends...so it is not even like the refinery could just make one blend and ship it everywhere for a higher price.

So, we have fewer refineries and more blends helping increase the cost of gas. We also have the price of oil. For those who are unaware, there is a coalition of oil-producing countries (OPEC) that have created a commitment to one another to all sell oil for the same price. OPEC has set the price of oil at $38/barrel. Because of (yep...you guessed it, environmentalism) we can not drill for oil in places in America that we know that have oil. We could drill and sell our oil for about $30/barrel. This would drop the price of gas down to about $1.15/gallon. We won't even mention the jobs that would be created and the economies that would be ignited. Instead of depending on other countries, we could sustain ourselves...Except for those darn Greenie Babies.