We consumers are being asked to conserve energy, particularly gasoline. Ways and means to conserve have been printed here: No jack-rabbit starts, drive at posted speed limits, do not idle engine unnecessarily and reduce the amount of errands.
The writer of this column is complying. How about you?
An article in the Denver Post offers answers to the question, "Why so high?" It is stated, "Petroleum price shocks are hitting consumers hard. From oil fields around the world to gas pumps to traders in financial pits, economic and political factors have conspired to push prices to record highs."
The Post lists six reasons:
1.) Production. It simply has not been able to keep up with output. China and India, both with soaring economies, are being blamed. Surprisingly, total production worldwide has risen 16 percent in the past 10 years, but this has not been enough to satisfy demand.
2.) Pipelines. They are being subjected to a variety of disruptions. This includes Iraq, of course, where we have read about sabotage of pipelines and production facilities. The Post article also mentions "political unrest in other producing countries such as Saudi Arabia, Nigeria, Venezuela and Russia leaves supplies vulnerable."
3.) Imports. Alarmingly, the United States now imports 58 percent of its oil. A decade ago, it was 45 percent. This high percentage subjects the U.S. to the whims of OPEC and other leading producers.
4.) Refineries. We have been recently reminded that, despite our huge oil appetites, no new refineries have been built here in 30 years. Various solutions are being considered. Using shuttered military bases for new refineries seems to have potential.
5.) The pump. The Denver Post quotes experts: "It could take years of sustained high gasoline prices to prompt most U.S. motorists to use less fuel. In the past six years, a gallon of gas has cost as little as 89 cents a gallon." It was during this period when some liberal economists were calling for higher taxes on gasoline, raising the price to $2 to $3 a gallon. Remember, they used $5 a gallon in Europe as a shining example? All of a sudden, those voices remain silent.
6.) Futures speculation. Another, final reason for high gas prices is that financial speculators have pushed oil prices high by betting that demand will exceed supply in the short-term future.
Oil futures' prices remain high because of the problems we have covered today.
George Spaulding is a retired General Motors executive and executive-in-residence emeritus at the School of Business and Economics at the College of Charleston.