The American Dilemma and How We Can Fix It

Posts tagged ‘Strait of Hormuz’

GAS IS FIVE DOLLARS A GALLON

Once again the price of gasoline is on the rise.  Part of that is the tension developing in the Middle East – Iran threatening to close the Strait of Hormuz – their saber rattling regarding Israel – and that state’s reciprocating with its own.

Although the price of light sweet crude has remained in a trading range, the price of gasoline has risen regularly.  (Today I saw an eight cent increase over the price I paid for it the other day).

The “experts” predict that when we hit the peak driving season this summer, we should expect to pay an average of about four dollars a gallon.  Personally, I did some analysis and think that number could be closer to five dollars.  There are two reasons for my conclusion.

By this summer I believe that the Federal Reserve will again engage in what it calls “Quantitative Easing” – a polite way of saying we’re going to further devalue the dollar.  Since the oil that we consume is denominated in dollars the effect is to raise the price of that oil.  That increase will naturally translate to increases in the price of “derivatives” – that is products that are made from that oil – one of which is gasoline.

Second, the refineries are not making any money based on the price of oil and the current price of gasoline.  As a result they are limiting the production of gasoline and will only increase the amount of their output if they are able to get higher prices for it.  Combine that with the increased demand from drivers and that’s how I arrived at my five dollar guestimate.  I sincerely hope that I’m wrong.

We know that when gas prices increase it drains money from consumers’ pockets and has a negative impact on the economy.  Since consumer spending constitutes two-thirds of the economy you can see the effect that increasing gas prices will have on what is only a poor recovery.

Those are the economic facts as I see them.  Having said that I would like to offer my readers a few common-sense ways to combat the vacuum cleaner that is preparing to suck the money out of your wallet and put it in your gas tanks.

First and foremost, slow down when you drive.  We know for a fact that combustion engines operate less efficiently at higher speeds (burning more gasoline) than they do at slower speeds.  At a time where we should be doing everything to encourage conservation – the Congress currently has a bill pending that would increase the speed limit on national highways from the present 65 to 75.  (That I am on the other side of Congressional thinking is like receiving the Good Housekeeping “Seal of Approval”).

Group your trips to minimize your gas consumption.  A little bit of planning can result in your driving fewer miles, getting your chores done more productively and save you some time.  I have gotten in the habit of asking a few neighbors if they need anything from the store or would like to drive with me when I shop.  One less car covering the same route is one less car burning gas.

While none of us can control the price that retail gasoline stations post for their product, we can control how much of it we consume.  And the added benefit is that we can not only save ourselves money but reduce the carbon footprint we are leaving on planet earth.  That  is reason enough for becoming thoughtful conservationists.

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