Be honest, when you read an article about national gas prices and find that your costs are less than another region, you feel smug. It’s a short lived joy because the same article probably told you that gas is less than a quarter a gallon in Venezula.
Chances are, you’ve never seen gas that cheap in your lifetime. At this point, you’d be grateful to fill up your tank and get change back from a hundred dollar bill! Officially, every government blames the world crude oil prices.
That’s the price per barrel than OPEC controls. As with any monopoly, when you control most of the supply, you get to control the prices. To drive up the price even more, OPEC sets “output restrictions” which means they decide to produce less as a way to force the prices up to whatever level they want.
It’s like being able to write your own paycheck and forcing your boss to sign it. As for oil production in the United States, there’s a battle between breathing and driving. Oil companies blame the EPA Tier 2 regulations on low sulfur fuels as a factor in price increases.
The purpose of the new regulations is an air quality improvement nationwide. So it becomes a chicken versus the egg issue. Do we care more about breathing or driving? Another side of that problem is that U.S. refineries aren’t at the same capacity as prior to Katrina and the hurricane battering of a few years ago. Regardless of the environmental impact, the refining capacity is lower.
Demand for gas worldwide is increasing. U.S. drivers aren’t the only consumers to satisfy. India and China are rapidly becoming major gas consumers. These new gas users compete for OPEC’s “black gold” which makes the market more challenging for buyers and more lucrative for suppliers.
Some oil producing countries aren’t under OPEC control, but are subject to internal problems. Political instability in Venezuela and Nigera can interrupt oil production and exports without warning.
Like any commodity, gas prices are driven by the supply and demand ratio. When demand is great and supply is smaller, prices increase. Since OPEC can control a substantial portion of the world’s oil supply, they have the ability to work this ratio to their benefit.
Consumers can take back the power and save money by reducing demand. As gas prices soar, that’s beginning to happen. Developing alternative fuels is an important way to change from primarily fuel users to major fuel producers.
Back in the 70s when OPEC learned how to flex its economic muscles, U.S. consumers demanded alternative fuels. A few years later when the crisis eased and we got accustomed to higher prices, the idea waned.
Once again, we’re discovering that the need for alternative fuels is an important way to reduce dependency on OPEC oil. Alternative fuel made from corn or other agricultural products not only can reduce fuel prices but also provides a new market for America’s farmers. With alternative fuels, farmers could become the new OPEC, providing fuel to an increasing world market.
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