How About Those Gas Prices? - Granite Grok

How About Those Gas Prices?

“As you know, the government takes 40 percent of what you make. The other 60 percent, of course, taken by the gas stations.” — Jay Leno

Is this You?Been to a Gas Station Lately? Prices have spiked markedly in the last two weeks. For those of us driving Sport Utility Vehicles the effect is most pronounced. Just this week it cost nearly eighty dollars to fill my Ford Explorer’s fuel tank. It was nearly a year ago when President Obama quipped,

“If you’re complaining about the price of gas, and you’re only getting 8 miles to the gallon… you may wanna think about a trade-in”

Yes. I know..it’s an SUV….but show me a “clown car” with the performance benefits of an SUV. Fact is, there isn’t one. It appears that Obama believes middle America has the means to expend all the funds necessary to lower gasoline costs and improve efficiency. The President may well be right, but he overlooks the considerable cost one has to undertake to achieve that end.

I drive a 2006 Ford Explorer and my wife drives a 2009 Mitsubishi Eclipse. My vehicle is seven years old and my wife’s “clown car” is three. While my gas-guzzling SUV is not exceptionally fuel efficient, my wife’s car is reasonable fuel efficient.   We owe nothing on the SUV and very little on the clown car.  If we take up the  President’s solution to solve our fuel costs,  we would trade in the SUV for something more efficient. .I would thus assume  $25,000 in new debt to replace my SUV with a hybrid clown car in an effort to t lower my fuel cost. This is where I get lost because I fail to see a solution here.  I add 25K in debt to reduce paying more at the pump.  Not to mention the higher auto insurance costs, the higher registration costs,  Where is the solution?

Clearly,Obama cannot see the forest through the trees, but there are others who can. Diana Furchtgott-Roth of Real Clear Energy made that point last month when she detailed Six Reasons Obama Can Lower Gas Prices. Furchtgott-Roth wrote,

“The president is discouraging domestic oil production and imports of oil from our trading partner, Canada, so our refineries are not operating at capacity.  In November 2011, refineries were producing at 87 percent of capacity, but they can produce more.  In the summers from 1993 through 2006 refinery capacity regularly exceeded 90 percent.  In June of 2004 and 2005, it reached 97 percent.”

Clearly, Obama is dumbing down production in favor of appeasing his environmentalist whacko friends who will kill the economy in favor of their green agenda.

Here is a summary of what Furchtgott-Roth suggests:

Approve Keystone XL Pipeline. The Keystone XL pipeline could bring oil down from Canada to our refineries in the Gulf. The supply of Mexican and Venezuelan oil used by the Gulf refineries is shrinking, and needs replenishing from new sources.  Instead, Canada is planning to build another pipeline to its West coast, so as to ship its oil to China.

Additional Oil Exploration.  Mr. Obama could allow individual states to determine their level of oil exploration.  Alaska, for example, wants to drill for oil in a small part of the Arctic National Wildlife Refuge, but federal law prevents that.

Mr. Obama could also allow for oil leasing on federal lands. The reason that North Dakota has been able to produce so much oil is that most of North Dakota is privately-owned and so property owners can lease out their land to oil developers. Development on federal land could bring in revenue for the U.S. Treasury and oil for the refineries in the Gulf.

Add flexibility to boutique fuel requirements.  Environmental Protection Agency regulations require 18 different blends of gasoline in different states, depending on the season and on air quality in the different states.  This keeps the price of gasoline high because excess supply of gasoline in one state cannot be shipped to another. Waiving these boutique fuel requirements, as they are known, would allow the price of gasoline to decline.

End ethanol mandate. Although ethanol lost its tax subsidy at the end of 2011, its use in gasoline is required by the 2007 Energy Independence and Security Act.  The law requires 250 million gallons in 2011, 500 million in 2012, gradually increasing to 16 billion gallons in 2022.  Ten percent of gasoline sold is ethanol.

This adds to the cost of gasoline.  In addition, America is approaching what is called the “blend wall,” which means that as the volumetric requirements under the law exceed the 10 percent used in motor fuel, gasoline distributors are subject to fines.  This means gasoline prices will increase even further.

Waive Low Carbon Fuel Specifications.  EPA regulations, known as Low Carbon Fuel Specifications, require some states to use gasoline with low levels of carbon in order to reduce greenhouse gas emissions. These standards raise the price of gasoline, according to economics professor Stephen Holland of the University of North Carolina. With gasoline approaching $5 a gallon, Mr. Obama could put these specifications on hold.

Now Is Not the Time to Tax Oil. In his fiscal 2013 Budget sent to Congress last week, Mr. Obama again proposed raising over $50 billion during the next decade in taxes on the oil and gas industry, the highest taxes on any industry.  All those taxes would reduce the profitability of American companies vis-à-vis foreign ones. Foreign companies would win bidding wars for all phases of petroleum development because their tax burdens would be lower. This would not help America: we want American companies to win the bidding wars.

Diana Furchtgott-Roth clearly articulates the means by which fuel prices can be stabilized and lowered through very real and tangible initiatives. Yet, knowing this President the way we know this President, don’t hold your breath waiting for relief anytime soon.

>