Thursday, May 29, 2008

Gas Prices Explained

Gasoline prices went over $4.00 a gallon here in South Florida without even stopping to look.

Average prices for regular gas broke records Wednesday, topping the $4-per-gallon mark for the first time in Palm Beach and Miami-Dade counties with Broward not far behind, according to the American Automobile Association.

Palm Beach County had the highest average price in the area, at $4.03 for regular gas, followed by Miami-Dade at $4.01 and Broward at $3.97.

Statewide, the average price has jumped 70 cents since March to an all-time high of $3.94 — the national average, too. Just a year ago — on May 16, 2007 — Florida topped the $3 per gallon mark for the first time.

The price is hitting records five days after Florida Agriculture Commissioner Charles Bronson urged the White House and Congress to launch an investigation into the increases as Memorial Day weekend marked the beginning of the summer travel season.

Andrew Leonard explains what you’re paying for when you cough up $4.09 (in California) for a gallon of gasoline.

On Tuesday gas prices hit record highs in the United States for the 21st day in a row. Many Americans are understandably upset and angry. Partisans on both sides of the political aisle believe they know why this is happening. The left blames greedy, customer-gouging oil companies; the right pillories environmentalists for blocking the construction of new refineries, preventing offshore oil development and opposing drilling in the Arctic National Wildlife Refuge.

But there’s much more going on here than good old greed or restrictive environmental regulations. Explaining the high price of gasoline at my local pump requires taking into account surging demand for oil in China and India, the falling value of the dollar, the impact of commodity price speculation by energy traders and a whole constellation of factors exerting steady downward pressure on supply. Those include the Iraq war, political instability in Nigeria and anti-American intransigence in Venezuela and Iran. There’s also the ever-popular peak oil thesis: As the production of existing oil fields in Russia, Mexico, the North Sea and possibly Saudi Arabia inexorably declines, discovery and exploitation of new sources of oil are becoming steadily harder and more expensive.


Sound complicated? It most certainly is, which is one reason why we should avoid the temptation to simply blame greedy oil companies or radical environmentalists. But it’s also strangely simple — the world, and its manifold dilemmas, can be seen in a single gallon of California gas.

Read the rest and you’ll realize that even if we were to find oil as abundant as sea water we’d still end up paying more for it than we ever did before.