THE BI-WEEKLY adventure to the outskirts of Charlottesville in search of cheap gasoline this past week was a sobering wake-up call. Gone were the alluring $1.42 or $1.53, replaced instead with $1.74 or $1.81. Even the Hess station out near Wal-Mart, the usual spot for the cheapest "brand-name" gas in Charlottesville, bumped its price for a gallon of regular unleaded gasoline to $1.62. The era of high gasoline prices had finally hit home.
To some degree, when it comes to high gasoline prices, Americans are victims of their own success. Our massive economy requires millions of barrels of oil every day; the United States, which represents only 5 percent of the population, consumes nearly 25 percent of the world's daily oil production. Calls for conservation through car pooling, more fuel-efficient vehicles and the use of alternative renewable sources of energy like solar energy usually fall on deaf ears in our society. For the time being, however, it appears Americans are content to rely on predominantly foreign oil to fuel their planes, trains and automobiles.
This nation's seemingly lackadaisical attitude toward dependence on foreign oil and oil in general is a concern. The Organization of the Petroleum Exporting Countries supplies the United States with approximately 60 percent of its imported crude oil every day. OPEC, nothing more than a wildly-successful cartel, exerts such a tremendous level of influence on the worldwide market price of crude oil. Just last week, OPEC's announced production cut of 1 million barrels a day (from current output targets of 23.5 million barrels), sent prices of crude oil even higher. For every $1 increase in the price of a barrel of crude oil, average retail gasoline prices in the United States go up approximately 2.5 cents. Why should the average American be so concerned the United States imports such a large amount of oil from OPEC countries?
A quick scan of the 11 nations that constitute OPEC should send a chill down the spine of anyone versed in contemporary geopolitical events. OPEC nations include Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. These 11 nations, some of the most politically unstable and terrorist-ridden nations in the world, exert the greatest influence on the supplies and price of the most valuable commodity in the American economy.
Particularly troublesome are the members of OPEC that control the greatest amount of crude oil reserves. Saudi Arabia sits on top of 225 billion barrels of oil; 19 of the Sept. 11 hijackers hailed from that nation. Iran has proven crude oil reserves of 99 billion barrels, is a member of the Axis of Evil and actively seeks the development of a nuclear bomb. Libya, long an adversary of the United States and haven to terrorists, has 36 billion barrels. There is an inherent moral hazard in allowing nations such as these to directly exert such a high degree of influence on the price of crude oil.
Those anticipating a reprieve in gasoline prices shouldn't get their hopes up. Rising demand due to travel as well as the use of special summer additives will most likely keep gasoline prices hovering near $2 a gallon. However, high prices need not necessarily be a permanent fixture. Universal solutions to help ease U.S. dependence on oil and lower prices, such as exploring alternative energy sources or simply following a regimen of conservation, go without saying. There are, however, other less glamorous ideas to accomplish these ends.
One easy solution to help lower costs is to boost U.S. oil-refining capabilities. Refining costs and profits constitute nearly 15 percent of the price of a gallon of gasoline, yet no new refineries have been built in the United States in over 20 years. Reliance on aging, over-worked and inefficient refining facilities is simply a recipe for disaster.
Another more short-term solution is a roll-back in gasoline taxes. The state of Virginia currently taxes gasoline at the rate of 17.5 cents per gallon in addition to the 18.4 cents per gallon federal excise tax on gasoline. The wisdom of nearly 36 cents of taxes per gallon of gasoline during a time of record high-crude oil price levels must be questioned. Governments on all levels should examine reducing gasoline excise taxes during periods of high crude oil costs. For now, the best idea is to keep scouting for low gas prices, try to group errands and trips together and walk or ride a bike whenever plausible.
Joe Schilling's column appears Tuesdays in The Cavalier Daily. He can be reached at jschilling@cavalierdaily.com.
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