REFLECTIONS

Posted on March 25, 2012

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GAS PRICES AFFECT EVERYTHING

SOME BLAME OBAMA

Rising gas prices cause problems in our budgets and the economy because the price of oil affects just about everything in our lives. A 42-gallon barrel of oil creates 19.4 gallons of gas, and the rest goes into other things.

There are over 6,000 products we use daily that depend on oil. The telephone, movie film, heart valves, cameras, umbrellas, soft contact lenses are several items that depends on oil in order to be manufactured. Also think about the vast majority of goods that are transported to market by trucks that use gas or diesel fuel. So the price of food and everything goes up.

Some people blame President Barack Obama for high gas prices. I am afraid that simplistic viewpoint fails to address three critical points.

First, it has been widely reported that for the first time in 50 years, the United States is a net exporter of gasoline as our supply exceeds our demand. If all the “drill here, drill now” proponents are correct, this excess supply should be driving our price of gasoline through the floor. But what is happening is big oil companies are selling gasoline to other nations in order to make higher profits. We have increased our domestic oil production by 11 percent since the president took office.

Second, summer gas usage is normally only three percent higher than winter usage, but gas speculators have driven prices on the commodities markets up 22 percent for the year. It is clearly not demand that is driving a price spike such as it is. Americans are using less gasoline than last year.

Last, the market uncertainty is being driven by the anticipation of several large refineries on the East  Coast scheduled for closure due to claims by the petroleum companies that they are unprofitable. The sad thing is that oil companies have not built new refineries for years. Also, the threat of oil from Iran being shut down is driving speculators.

There is little the president can do to stop the rising gasoline prices without the help of Congress and new regulations on big oil companies and speculators.

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