Why Gas Prices Are Soaring

It doesn't make sense to me that prices can fluctuate so drastically from one week to another. I paid $2.66 per gallon about a week ago and today everywhere gas is $3.19 per gallon. $.53 per gallon in such a short period and the up and down. That increase adds up to large amounts of money. There is really no good explanation for this.

The title of this article is likely the topic of discussion at most lunch tables, cocktail parties, and everywhere these days. I agree with the author that the volatility in gas prices (and everything associated with the oil industry for that matter)is damaging to businesses and individuals, making planning for the future and sometimes even day-to-day next to impossible. The author is also correct that government intervention is not ideal. I do think, though, that at this point in time on this issue, it is the only viable option.

Don't you think the government helping is not the answer. If that's what they wanted, why wouldn't they have done something a long time ago, like back in the late 70's when there was a scare that gas would run out?
A good example is what cars get for gas mileage today, not impressive! My brother had a 1984 Honda CRX that got 50 MPG on occasion. My wife's 1997 Saturn got 32 miles per gallon and some of the newer vehicles still only get into the low 30's in reality. So what has happened to all of that technology? We can put an astronaught into space, but for some reason we aren't getting the potential gas mileage we could get 20 years ago. Now we complain about the price of gas, but I don't think it would be as big of a topic if the automobile companies were using available technologies. We still believe in buying American Made vehicles in our household even though that may branch into another negative discussion.

In essence, we're talking about "price fixing". It didn't work in the 70's with Nixon/Ford--anyone old enough to remember WIN buttons?--and it's wouldn't work now. Why on earth would we want the same system that has paid hundreds of dollars for hammers and sends Congressmen and Senators, with their families on "fact finding missions ie vacations at our expense, to set the price for fuel? It's messy, it's painful but it's the free market at work. Or are we all such that we want to actually believe--"I'm from the guv'ment and I'm here to help you."

Americans, as a rule, enjoy the luxuries that their hard work has earned them. If they can afford it, most people will forego the smaller, more economical cars in favor the more impressive (and larger) SUVs and luxury vehicles. The only way to convince the majority of Americans to be any different is through a reward/punishment system that would allow the government to provide a strong fiscal encouragement for owning the more economical vehicle. So, how about an extra $5,000 in "taxes" added to the cost of a vehicle for every mile per gallon that it is rated below a "standard mpg rating" of 25 or 30 miles per gallon. On the flip side, how about a similar savings to the purchaser of an economy car for every mile per gallon the vehicle is rated above the same benchmark. I am thinking that the "reward" will not have to be as big as the punishment to encourage the drivers of the enconomy cars. Of course, this reeks of massive governmental interference. But, then, so does almost every other effort made in this area. This one would be very simple to administer - the car dealerships feeding the "punishments" into the coffer and drawing the "rewards" out of the same fund. Of course, it probably wouldn't work because there would be shouts of "governmental interference" from one side of the country to the other, tying this program up in the legal system for years. But, it would be much less expensive to administer. We wouldn't need a lot of technical expertise, just some accountants dealing with the sales records from all the car dealerships in the United States. It may be the only thing that all Americans will understand. It isn't foolproof. There are still many very wealthy Americans who won't mind spending an extra $50,000 or $60,000 for the privilege of owning a Hummer. The folks with very little money seldom buy new cars anyway, so they won't figure into this very significantly. On the other hand, there may be a much larger middle group who will respond positively to the financial encouragement. I realize that this is a drastic solution, but it does come with the only factor that seems able to reach the heart and guts of every American - the power of Money.

Oil companies have been making billion dollar, progressively record breaking, windfall profits for the past 7 years and this economist gives them a “pass” and blames it on “market volatility”... ?! Absurd.

The oil companies don’t have a problem giving their shareholders progressively increasing profits, there’s no volatility to their bottom line. How come they can’t manage the production (which accounts for most of the price premium and volatility) as well as they do their profits?

And their whining about government regulations preventing them from investing in refineries... for 30 years... would laughable if it weren’t so tragic. After all, who is more effective in shaping government policy than the oil lobby? If it wasn’t helpful to their bottom line, you can be sure that the artificial “supply constraint” created by the lack of investment in refining infrastructure would have already been legislated in their favor.

Case in Point: When it comes to government regulations, you don’t hear the US oil cartel complaining when it is legislated in their favor as regarding US royalty payments. From the Washington Post, Feb 13, 2007: “The government will let [oil] companies pump about $65 BILLION worth of oil and natural gas from federal territory over the next five years without paying any royalties.” I can assure you, it takes no ordinary citizen to get this sort of sweetheart deal.

Other comments from this economist - like the zero-sum reasoning between energy and the environment, leaving hydrogen technology out of the analysis as well as from the whole backward looking “economist” profession - masquerading as “academic analysis” but in reality is nothing more than voodoo fantasy-spin for an incumbent world view.