You’ve got Gas and beano won’t help

I got gas today.   No not me, for my car.  As I was standing there pumping petrol into my car at $3.09 per gallon for regular gasoline I started thinking about how it is we’re paying so much for gasoline and is there anything we can do to impact the rising price of gasoline?

As the pump stopped at $44.37 I had a moment of self-realization – I don’t know shit about the whole oil biz process.  What an idiot.   Then again, do I really want to know anything about the biz.

Well that lead me to start doing some homework.   

OK Johnny get Hadji and Bandit into the hydrogen fueled rocket sled we’re going on a ride.  

Factoid #1 – the price of gasoline at the end of January was 2.11, today it’s 3.09.  That’s and increase of NINETY EIGHT (.98) CENTS in about 15 weeks. 

So what has made the price of gasoline go up?  Who the heck knows…Shit I’ve been reading a ton of different articles and I am not sure who I believe.  It’s down right comical reading some of the big oil sponsored sites.  

Reading the oil company sites lead me to rethink what I learned about the founding of this country.  I did not know that without gasoline we would have no freedom or liberty or the ability to pursue happiness.   I guess happiness is driving around in a 1967 Chevy powered by a 427 cubic inch, 435 horsepower engine.  What the fuck.  Last time I checked the basic tenets on which this country was built were discussed and documented over a hundred years before the first internal combustion engine was invented.  

In my opinion here’s a number of factors driving gasoline cost-

Sweet crude oil cost (sweet is “cleaner’ form of crude as compared to sour) don’t ask….seems more like a description of how I order my chicken at Wong Garden.  That would be kinda funny….

Me: Hello is this BP oil?
BP:  Yes, how may I direct your call?
Me:  I’d like to order 100,000 barrels of sweet and sour crude
BP:  Excuse me sir?
Me:  Sorry, can you transfer me to the person I order from?
BP:  Order what sir?
Me:  Oil, I gotta get me some of that sweet and sour crude…

Sorry, back on track….Hadji where you be….   

Supply and demand – I knew that economics course would come in handy.  Supply and demand is, after the direct cost of the raw material (sweet crude oil), a significant driver of gasoline costs.  Taking this a step farther, the supply and demand equation represented by our need for gasoline is said to be inelastic.  It is inelastic in that large changes in price does little to negatively impact the demand.   We want/need gasoline.  It is so interwoven into our everyday we can’t do without and we’ll pay whatever it takes to get us some more.  We’ve become a society of internal combustion junkies.  The challenge is that the folks that control the methadone to help our gasoline addiction don’t want us to have it cause they’re making too much money off our addiction.

The next driver of cost is the whole refinery thang.

The refineries are the vehicles we use to turn sweet crude into gasoline (among other things).  It is a distillation process driven by the boiling points related to the different molecular structures of the components of the crude….My head hurts all ready.

A few notes on refineries.  There has not been a new refinery built in the U.S. in the last 30 years (so much for the thought of capital reinvestment).  The refineries are aging quickly and are subject to a number of external forces that impact there production capability.  First is the weather.  Remember Katrina – well in addition to erasing New Orleans it supposedly did a ton of damage to our refinery infrastructure.  Second is geopolitical turmoil that can impact crude supply and even delivery of refined products.  Third is the aging of the refineries.  This aging is causing many of them to be off line longer and longer for repairs to ensure safety.  Last is the demands for different gasoline products by state.  It seems that every state is developing there own gasoline formula that the refineries need to meet.  Whether it’s the environmentally focused California standards or the live free or day standards in Nude Hampster.  This Baskin Robbins approach to gasoline “flavors” does not help keep the cost of gasoline in check.

Factoid #2 From Jan – April this year the refineries produced 8.73 MILLION barrels of gasoline per day.  This is the highest level ever for the same period, according to API ( American Petroleum Institute).  You’d think that is a shit load of gasoline.

For the week ending May 11 we American’s consumed 9.404 MILLION barrels of gasoline PER DAY!  There are 42 gallons per barrel.  A little math and that reveals that for the week ending May 11th we purchased roughly 394,968,000 gallons of gasoline per day.  Let’s say we averaged 12 miles per gallon then we drive 4.74 BILLION miles a DAY.  Boy are we fucking adicted, never mind where the fuck are we all going?  But that leads to an interesting point.  If we could simply increase the average miles per gallon by say 10 percent to 13.2 miles per gallon we could drive that same 4.74 billion miles on 35.9 million gallons LESS of gasoline.  That would mean our consumption per day would drop to 8.6 million barrels per day.  Boy wouldn’t that piss off the big oil companies….demand less than the supply on an average daily basis. Hmmmm…demand less than supply…hmmm pricing needs to be more competitive to spike demand…hmmm prices go down….hmmm.  Sorry I was daydreaming there for a moment. 

So, here’s what we have to look forward to (my guess – a slight decrease in gasoline prices to make us take our focus off them and then look to see big oil exploit any type of negative news – hurricanes, turmoil, etc to drive prices back up).  Why? 

  1. We’re coming into the highest driving (demand) period of the year
  2. Hurricane season is starting
  3. Global unrest is at an alarming level
  4. Gasoline reserves (supply), while just now being restocked have been at their lowest level in 20 years 
  5. Refineries are not getting younger
  6. Bush administration is just that, the Bush administration

What can we do –

  1. Drive less – stop that addiction – get in a car with someone else, consolidate those trips to the grocery store and post office.
  2. Use public transportation where appropriate – heck it’s even free in some areas
  3. Insist the government adopt more aggressive minimums for new car mileage thresholds – push your representatives and senators to be more responsible
  4. Adopt a single federal formulation of gasoline that meets California standards – do away with the 57 varieties of gasoline…
  5. Continue to develop alternative additives to blend with gasoline with the goal of extending miles per gallon averages and lower emissions…not sure ethanol is the answer…very costly to distill.
  6. Increase federal taxes on sales of automobiles (revisit gas guzzler tax) that don’t meet minimum miles per gallon averages.
  7. Provide corporate tax credits (annuity) related to the production of alternative energy automobiles.  Tax credits wouldn’t be available until the Alternative Energy vehicle is in production.
  8. Significant tax credit for individuals/corporations purchasing SULEV and high mileage automobiles.
  9. Federal commitment to improve rail service infrastructure in the northeast corridor (Boston-NYC-Washington).  Look to France and Japan for realistic solutions.

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