Monday, May 07, 2007

The Greatest Mystery in the Universe

It has to be gas prices. From pump prices that go up 25 cents a gallon instantly, even when it’s the same inventory, to experts who can’t agree on where prices are headed. Today on the way to work I heard a radio news report that prices would likely stabilize or even fall. Now, at lunch, I see this:
NEW YORK ( -- With gas prices near record highs, experts say $4-a-gallon gasoline is just around the corner.

"I think it's going to happen," said Phil Flynn, a senior market analyst at Alaron Trading in Chicago. "Unless things change dramatically, I think we're going to see $4 a gallon."
Also of note: crude oil prices are down. That means someone is making TONS of money off these higher prices at the pump. But not to worry, I’m sure it’s being put to good use.

Trying to make sense of all of this is a fool’s errand for mere mortals (that is, non-oil industry executives).

1 comment:

Anonymous said...

Although you guys think I am a hard right winger, I am actually a libertarian and strong environmentalist. Thus I see 2 major things driving up the prices:

1. lack of refineries in the US. Last summer we were at 99.99% capacity. Although crude may go down in price the factor directly affecting the supply is the bottleneck at the refineries. We have not built a new refinery in the US in over 20 years. Lift the restrictions on building new ones and the price will drop.

2. The macro problem is the overall world demand is up. China has started to become much more industrialized and is competing for the same barrel of crude from the mideast that we are. Thus the prices will rise due to heavy demand.

My suggestion is 2 fold:

1. Lift the ethanol tarrif from Brazil. We have a 50cent per gallon tax on all ethanol imported from Brazil. Brazil's sugar cane based ethanol is much more energy efficent than our corn based ethanol. But Durbin, Obama, and other senators from the midwest are trying to protect our farmers. Well maybe we should not protect them if they are developing an inferior product. It just doesnt make sense.

2. Longer term we need to lift the patents on alternative energy which the oil companies have bought up and are sitting on. I saw a presentation about Apollo 13 from the leader of Mission Control on that flight which was around 1970. The item that really stuck with me was when he said that the lunar capsule was fueled by hydrogen fuel cells. Imagine that, in 1970, we were flying spacecraft with hydrogen fuel cells and yet in almost 40 years we have not been able to transform that technology to be able to be used in cars???? Unbelievable