Own it up to the fact that I worked at the Department of Energy for five years, but I can't stand the kvetching about the price of gas. I'm on a bit of rant today, after reading Thomas Sowell's column in Real Clear Politics bemoaning the lack of serious explanation by politicians to the general public regarding the price of gas.
By the time yet another federal investigation is completed-- and turns up nothing to substantiate the villainy that is supposed to be the reason for high gasoline prices-- most people's attention will have turned to something else.
Newspapers that carried the original inflammatory charges with banner headlines on page 1 will carry the story of the completed investigation that turned up nothing as a small item deep inside the paper.
This has happened at least a dozen times over the past few decades and it will probably happen again.
What about those "obscene" oil company profits we hear so much about?
An economist might ask, "Obscene compared to what?" Compared to the investments made? Compared to the new investments required to find, extract and process additional oil supplies?Asking questions like these are among the many reasons why economists have never been very popular. They frustrate people's desires for emotionally satisfying explanations.
Sorry, folks, it's not a conspiracy. The price per barrel directs the price at the pump, and the price per barrel is determined by a Gordion knot of international political, financial, and policy events that change throughout the day and evolve over time.
For a few facts on the price of oil and the price of gas I suggest with enthusiasm the site of DOE's Energy Information Administration (EIA):
A Primer on Gasoline Prices
Where Does My Gasoline Come From?
Basic Petroleum Statistics
There are few individuals, countries, or events that dictate the price of oil on their own. Even the United States can't dictate a price. It can only massage a daily price per barrel with policy change here or a geopolitical event there. Al Qaeda is one group that can dictate the price of gas. If they successfully attack a critical site in Saudi Arabia -- places like Ras Tanura or Abqaiq -- they could take the global price into wild speculative territory, and depending on the extent of the damage, bring the world market to a halt.
If Al Qaeda succeeds at taking any KSA facility off line, then you'll be pining for the day of $4/gallon gas.
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