Weekly Opinion/Editorial
AMERICA NEEDS AN ENERGY POLICY!
by Steve Fair
by Steve Fair
Retail gasoline prices reached a record high of $4 per gallon this week. Part of the reason is because Congress under the leadership of U.S. House Speaker Nancy Pelosi has been unwilling to bring to the floor a bill that would open domestic drilling and increase refining capacity.
On reaching the historical high of $4 gasoline, House Minority Leader John Boehner, R- Ohio said, “Today marks another dubious day for this Do-Nothing Democratic Congress,” “On their watch, gas prices have soared to new heights, and by refusing to schedule a vote on a plan to increase American-made energy to help lower gas prices, congressional Democrats are complicit in this unprecedented surge in fuel costs.”
On April 24th, Pelosi stated on Larry King Live the average price of a gallon of gas was $2.59 when in fact it was $3.50 a gallon. King corrected her, but her misstep received little mainstream media attention. Pelosi’s wrong answer revealed how out of touch she is with the average American. Being out of touch is common with politicians- no matter their party affiliation, but Pelosi’s lack of knowledge on this critical commodity is frightening.
When you pay $4 a gallon at the pump, what are the components that contribute to that price?
On reaching the historical high of $4 gasoline, House Minority Leader John Boehner, R- Ohio said, “Today marks another dubious day for this Do-Nothing Democratic Congress,” “On their watch, gas prices have soared to new heights, and by refusing to schedule a vote on a plan to increase American-made energy to help lower gas prices, congressional Democrats are complicit in this unprecedented surge in fuel costs.”
On April 24th, Pelosi stated on Larry King Live the average price of a gallon of gas was $2.59 when in fact it was $3.50 a gallon. King corrected her, but her misstep received little mainstream media attention. Pelosi’s wrong answer revealed how out of touch she is with the average American. Being out of touch is common with politicians- no matter their party affiliation, but Pelosi’s lack of knowledge on this critical commodity is frightening.
When you pay $4 a gallon at the pump, what are the components that contribute to that price?
Forty five percent of the price of a gallon of gas is tied directly to the price of crude oil. Crude oil pricing is over $130 a barrel and continues to rise. That is because worldwide supply is tight and gasoline demand in the US and the world is up despite high prices. U.S. consumers use 20 million barrels of crude a day and we are importing 55% of the crude oil we use. When you consider that America has only 5% of the world’s population yet consume 45% of the gasoline produced in the world; it’s apparent we are the market that controls the price.
Twenty five percent of the price of a gallon of gas is federal and state taxes. In Oklahoma, our state gasoline tax is seventeen cents and ranks 5th lowest nationally. The federal gasoline tax is 18.4 cents per gallon. Senator McCain has suggested the federal tax on gasoline be suspended for the summer to give consumers a break, but Congressional Democrats and Senator Obama have balked at the idea, saying it would not make that big of dent in the overall price.
Fifteen percent of the price of a gallon of gas is refining and profits. Refinery capacity in the US is near peak capacity. Hurricanes Katrina and Rita impacted some refineries and reduced our capacity by about ten percent. We have not built a refinery in the United States in 29 years. Over the last quarter-century, the number of refineries in the United States dropped to 149, less than half the number in 1981. Any comprehensive energy policy in the United States must address refining capacity.
Fifteen percent of the price of a gallon of gas is marketing and distribution. Since most gasoline is trucked to it’s final destination, the price of diesel fuel also impacts the price at the pump. Over 50% of gasoline is refined in the Gulf Coast, so transportation costs become a major factor.
Other factors that impact the price at the pump are the US deficit, which has caused the value of the dollar to decline. Because oil is priced in dollars, no matter where in the world it comes from, producers want higher prices in order to maintain their income.
Another factor is the Energy Policy Act of 2005, which mandated the incorporation of 7 billion gallons of corn-based ethanol into the American fuel supply in an effort to reduce gasoline consumption. Ethanol production, suddenly buttressed by a federally guaranteed demand for its product, overnight became an extraordinarily profitable venture.
Even as we reach the milestone of $4 per gallon gasoline, the true price of gasoline has fallen more than 40% from its inflation- adjusted price of $3.11 per gallon in 1980-81. Americans pay about one half to one third of the price western Europeans and others have paid for many years. According to John S. Herold, Inc. the price of gasoline is cheaper by volume than many other household products, and the cost has not risen as quickly over the years. "On a per-barrel basis, gasoline is America's bargain liquid: 10 percent cheaper than bottled water, a third the cost of milk, a fifth the cost of beer, and less than 2 percent the cost of a bottle of Jack Daniel's," the study said. While that information is of little comfort to those with gas guzzling SUVs, the long-term solution to high gas prices is a comprehensive energy policy that includes domestic drilling and the building of refineries.
Twenty five percent of the price of a gallon of gas is federal and state taxes. In Oklahoma, our state gasoline tax is seventeen cents and ranks 5th lowest nationally. The federal gasoline tax is 18.4 cents per gallon. Senator McCain has suggested the federal tax on gasoline be suspended for the summer to give consumers a break, but Congressional Democrats and Senator Obama have balked at the idea, saying it would not make that big of dent in the overall price.
Fifteen percent of the price of a gallon of gas is refining and profits. Refinery capacity in the US is near peak capacity. Hurricanes Katrina and Rita impacted some refineries and reduced our capacity by about ten percent. We have not built a refinery in the United States in 29 years. Over the last quarter-century, the number of refineries in the United States dropped to 149, less than half the number in 1981. Any comprehensive energy policy in the United States must address refining capacity.
Fifteen percent of the price of a gallon of gas is marketing and distribution. Since most gasoline is trucked to it’s final destination, the price of diesel fuel also impacts the price at the pump. Over 50% of gasoline is refined in the Gulf Coast, so transportation costs become a major factor.
Other factors that impact the price at the pump are the US deficit, which has caused the value of the dollar to decline. Because oil is priced in dollars, no matter where in the world it comes from, producers want higher prices in order to maintain their income.
Another factor is the Energy Policy Act of 2005, which mandated the incorporation of 7 billion gallons of corn-based ethanol into the American fuel supply in an effort to reduce gasoline consumption. Ethanol production, suddenly buttressed by a federally guaranteed demand for its product, overnight became an extraordinarily profitable venture.
Even as we reach the milestone of $4 per gallon gasoline, the true price of gasoline has fallen more than 40% from its inflation- adjusted price of $3.11 per gallon in 1980-81. Americans pay about one half to one third of the price western Europeans and others have paid for many years. According to John S. Herold, Inc. the price of gasoline is cheaper by volume than many other household products, and the cost has not risen as quickly over the years. "On a per-barrel basis, gasoline is America's bargain liquid: 10 percent cheaper than bottled water, a third the cost of milk, a fifth the cost of beer, and less than 2 percent the cost of a bottle of Jack Daniel's," the study said. While that information is of little comfort to those with gas guzzling SUVs, the long-term solution to high gas prices is a comprehensive energy policy that includes domestic drilling and the building of refineries.
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