The other day, noticing that my car was running low on gas, I stopped at my local Exxon station. I didn’t notice the price right away because, like many of you, I have to fill up when I have to fill up. The prices just make me angry and don’t really effect my buying habits.
While my Chrysler’s tank was filling, I glanced at the little LCD display where they tell you how much you’re paying per gallon. $1.799, or—for all intents and purposes—$1.80. ‘Plus’ gas goes for a whopping $1.91 and ‘supreme’ for $1.94.
Now there are three potential reasons for this gas price inflation: 1) The oil exporters gouging us, 2) the bizarre American policies that effect refinement of oil and its distribution and then over-tax us on gas sales, and 3) the gas stations themselves gouging us.
Each of these three players point at one of the other three and say, “Blame them!” when, in fact, all three are happening and all three play a part in how much we pay at the pump. The all-around effort in government, business, and the Organization of Petroleum Exporting Countries (OPEC) to take advantage of people, combined with the government’s sometimes well-intentioned wacko policies, have caused the cost of gasoline to grow exorbitant—and they’ve done so at the cost of our economic well-being.
Most of the oil that is consumed in the United States comes from countries who are members of OPEC, a price-fixing cartel that—if it existed inside the United States—would find itself facing any number of antitrust charges. Pity that those don’t apply internationally. The member countries wink-wink and nudge-nudge at each other behind closed doors, and then come out with an announcement that they will arbitrarily adjust production this-way or that in an attempt to get the most profit.
Because they act as one unit, OPEC effectively controls the world’s oil market—and they do so with only their collective best-interest at heart. They do it in their own non-competitive universe, where it doesn’t matter what happens to the ultimate consumer—you and me—or to the economies of the nations they live in. All that matters is that we all keep buying their oil products. Without competition, OPEC will continue to price their product in a monopolistic way that harms the consumer.
An example of what I mean: OPEC recently voted to lower production in the midst of a worldwide gasoline shortage, and then had the audacity to blame U.S. gas policy for the high prices here in the States.
While their claim that they are utterly blameless is a load of crock, U.S. policy has not helped. Our country is a hodgepodge of differing local and federal regulations regarding gasoline that fragments the refining process in an incomprehensible way. Gasoline sold in the Washington, DC, metro area has to be formulated differently than gas sold in, say, Lynchburg, Virginia—only three hours away. Thus, the gas has to be produced in different refineries and shipped separately. The complete lack of homogeny in U.S. regulation forces the price of gasoline higher.
Another piece of how government effects the price of gas is the ever-enjoyable topic of taxation. Most people that I know are unaware that gas is taxed at all, because—unlike separately-tabulated sales taxes—it is simply added into the cost. You might be surprised to know that every single gallon of gas sold in the United States includes a 18.4¢ gas tax. It doesn’t end there either; individual states add their own taxes. In Virginia, the state gas tax is 17.5¢—amounting to a grand total of 35.9¢ out of my $1.80/gallon going to the government.
That’s almost a 20 percent tax!
The gas stations themselves, however, are not blameless. They’ll claim that OPEC is at fault for the high gas prices, and I was inclined to believe them, but then I noticed when the price changes actually happen.
When OPEC announces a cutback in production, the price at the pump goes up significantly the next day. “OPEC has cut back,” the station managers say, “we poor stations have to raise prices to stay afloat.” Fair enough, I can understand that. But how come when OPEC raises production, the prices at the pumps stay the same? Slowly, over a few weeks, they finally begin to creep lower. “Yes, OPEC raised production,” the station managers say, “but it takes some time for those price changes to get through the system.”
Well, if price changes don’t filter through for a few weeks, why did the cost of gas skyrocket the morning after OPEC cut production? Sounds to me like somebody is trying to skim a few thousand extra dollars off their loyal customers’ checkbooks. The foreign producers make a great scape goat, but greedy gas stations play a major role in the gouging of customers like me—customers who usually don’t have the option to put off a gas purchase until the prices get reasonable again.
So this triad of selfishness has forced the cost of gasoline up to $1.80/gallon, and I find myself wondering just how much further they intend to push this. I wonder because, not only do gas prices effect my finances, they also effect everybody else’s—businesses and individuals alike. Higher gas prices mean higher shipping costs, which mean higher prices on everything from televisions to office chairs. Higher prices on consumables mean higher expenses for business, which mean higher prices for their services and less available cash for growth and hiring.
In other words, higher gas prices hurt the economy.
So what can we do? First and foremost, the federal government—the EPA and, if need be, congress—needs to end the hodgepodge patchwork of differing gasoline regulations in different regions. Gas in Fairfax should be the same as gas in San Diego should be the same as gas in Lynchburg. No state should have the authority to fragment the gas market, and the EPA sure as hell shouldn’t be helping them do it either way.
Second, the gas tax needs to come down . . . a lot. 35¢ on every gallon is unreasonable. The federal gas tax should be immediately lowered to 5 percent of the per-gallon price (rather than the current system, which does not account for price changes). Further, states should be prohibited from raising their gas taxes higher than the federal rate.
Third, we need to end gas station price fixing and price gouging. These activities are illegal, and it is time that the relevant local and national authorties enforce the law. The gas stations are taking advantage of their customers, and it has to be stopped.
Fourth, we need to end our reliance on OPEC. This happens in a couple of ways. First, we need to move faster toward hybrid and fuel efficient vehicles. A few companies have brought out a few products, but automobile manufacturers have the technology to make the entirety of their product lines into gas/electric vehicles right now. But these hybrid cars and trucks should only be a stop-gap measure while fuel-cell and other technologies are developed and become more affordable. Ford, GM, Daimler Chrysler, and others are all moving far too slow.
But switching to fuel efficient vehicles isn’t enough—we need our own independent source of oil. The clearest and most logical choice is the Arctic National Wildlife Refuge (ANWR) in Alaska. Giving up some of this frozen tundra in the interest of national and economic security is a small price to pay for independence from the OPEC cartel—especially when you consider that the drilling would be done in a highly regulated and ecologically friendly way, and would only effect a tiny portion of the refuge.
If we do not take these steps, the perpetual upward skew in gasoline prices will continue unabated. OPEC nations, gas stations, and the government will continue reap huge rewards at our expense. In the long run, that’s not good for anyone.