WBNS 10TV, a television station in Columbus, Ohio, recently posed a question on its Facebook page. They asked followers who or what they think is responsible for the price of gasoline. The most popular answer among the people who post comments is that high gas prices are caused by the greed of the oil companies. President Barack Obama addressed similar concerns when he announced that the U.S. Justice Department will investigate whether the price of gas has been artificially increased by speculation among commodity traders.
Saying that an increase in the price of gasoline is caused by greedy oil companies is overly simplistic. They are in business to make a profit, but they have to compete against each other. If one oil company raises their prices significantly more than the other oil companies, they will not sell any oil or gas. I would be surprised if speculation is responsible for the price of gas increasing by more than a few cents a gallon.
What many of us seem to forget is the law of supply and demand. The price of gas is going up because we are running out of crude oil, from which gasoline is refined. The law of supply and demand determines the price of anything. If the supply of something increases or if the demand for something decreases, prices will go down. We can see this with the price of pork. More people now believe that the amount of fat in pork is not good for them and are buying less of it. The supply has not decreased in proportion, so those who still enjoy pork chops can find deals at the supermarket. Deals are not available on honey. A mysterious disease has killed off many honeybees, so honey is in short supply. The demand for honey has stayed the same, but there is less of it available. It is like we are all at an auction. Fewer people are bidding on the same amount of pork chops, and the same amount of people are bidding on less honey.
The situation with gasoline is similar to the situation with honey. There is less gasoline available than there used to be, but the same number of us are bidding on it. There is less oil available because we have used it up. We have been using it up for more than 100 years. Allowing oil drilling in places where we do not now allow it might keep the price of gas from going up for a little while, but it will go up again once we use that up. We have used it up through our pride, impatience, snobbery and laziness. We love to be seen in big, fancy cars, and we love to drive them fast. We think public transportation is for losers. We would rather spend the money to own a car than to walk a few blocks to catch a train or a bus. People who would rather take a bus or train to get to work are often out of luck because public transportation systems have not been built. We have put our money into roads and streets to accommodate automobiles. Those who want to ride bicycles risk death or injury at the hands of impatient and inattentive drivers. Obesity is epidemic, but we do not want to walk a few blocks to the store. We would rather use chainsaws, snowblowers and power mowers than do any kind of labor.
We have designed a transportaton system that uses fuel as inefficiently as possible. CSX claims that its trains can move a ton of freight nearly 500 miles on one gallon of fuel. This seems vastly more efficient than moving freight by truck. It makes me wonder why more freight is not moved by trains. If freight has to be moved hundreds of miles, it seems that it would be much more efficient to move it by train, and then put it on a truck to move it from a train depot to the final destination. This may add to the time it takes to deliver products to market, but I would think it would help decrease the final cost of the products.
We have used up all of our oil by using it inefficiently. If we want to stop paying outrageous prices for gas, we will have to avoid driving. We will have to take the bus, walk, or ride a bicycle. We may have to wait an extra day for products to arrive at the store.
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