Wednesday, 14 March 2012

The president can't lower the price of gas at the pump! What can he do though?

The president can't lower the price of gas at the pump! What can he do though?

Paying to much at the pump?
First lets clear something up.  The price of gas at the pump is set by a globally regulated market. Local conditions have little to do with the price of petrol. The oil companies scared the people in California into thinking that placing a tax on oil removed from the ground in California would raise the price of petrol at the pump and this is just an out right lie.  What would have happen in that situation would have been, at worst, that the companies would have been paying a fee for removing a limited natural resource to the Californian citizens and the price of petrol would go up by a hair.  That money could then be used to provide more services to the people of California.  Note that "fee/tax" which is paid by the oil companies in every other state and nation.  California just lets the oil companies rape their limited natural resources for free.  Most likely that tax would be absorbed by the global market anyway.  So if the price does goes up it is hedged over the entire world.  IE you might pay 1¢ more at the pump but the oil being removed might be taxed at a rate where the citizens of California would benefit by double digits.  Its kind of like paying an extra 35 cents at the pump to get a few dollars worth of benefits and services in other areas and the rest of the world makes up the difference.  That is the worst case scenario.  Most likely you'd not notice an increase directly due to that tax.

The same process also means that increasing oil production in the USA doesn't lower the price at the pump.  What it does do is provide more money to US citizens employed by the industry.  It can build up our reserves so that if there is a drastic change that OPEC causes we can buffer that a bit but that isn't a sustainable solution at this point and is more a buffer against some situation where supplies are limited.  Prices would still go up but there might not necessarily a limitation to supply.

So you might ask "How does the 'all of the above' policy does help me?"  As you reduce your dependence on petroleum based products you reduce the impact of the price rises of petroleum.  Let me demonstrate this with a simple thought experiment.

Say your electricity is produced 75% petroleum based and 25% based off of renewable energy, that aren't put on a global market like oil is, that if the price of oil goes up by 50% that you don't get slugged with a 50% increase because only 75% of the cost is effected by the price of petroleum based products.  So instead of a change of 50% you only get slugged for 37.5% increase.

Say your car is a ford focus.  You drive an average of 15,000 miles in a year mix of city and highway driving you would use about 500 gallons of petrol say at a cost of $4 a gallon your up for $2000.  Now if petrol jumps to $5 a gallon then your annual fuel cost jumps by $500 or ~$10 a week.  Not really rocket science here.  So what can you do?  Well go for the hybrid ford focus and your buffered.  Your bill is over 25% less to begin with so instead of $2,000 a year you are only talking about $1,500 a year, $500 cheaper.  But that increase of petrol from $4/gal to $5/gal means you only pay $375 more a year.  At the end of the day the you're still spending less at the pump after the increase in price then you where before the increase with the non hybrid version of the car.  You can go one step further and get a full electric version of the car.  Then your cost go from $2,000 or $1,500 a year to about $600 a year and get emissions.  You will pay a bit more for it at the dealership but after government rebate you are talking 4-5 years of fuel savings if prices don't climb, less time if they do.

Now you might say "Why should I spend more upfront?"  Well you are insulating yourself from the changes for 1.  Second there is no emissions.  Third they are putting all the bells and whistles on this car so many of the options on a normal focus like the sat nav, dual-zone climate control, parking sensors and others come standard.  If that is still not good enough there are other similar cars you can get for less money to include the volt, Nissan LEAF and the Mitsubishi i-MiEV.  The Mitsubishi costing less then a non hybrid focus after the government rebate but its honestly a bit to "European" for most Americans I think.  Baby steps.  Go for a car that looks like it isn't a small European car.

Remember too that this technology is still pretty new and as the market gets a bit more mature technological advancement will bring the cost down even further.

I'll end it on home efficiency.  If you are still using incandescent light bulbs get off them.  If you leave your lights and tv's on...turn them off.  If you can ... get solar panels.  I've read papers on people who have gone effectively off the grid by a combination of solar panels and relatively simple changes to their power usage.  One professor at Berkeley paid for the whole conversion of his house by adding it to his mortgage.  You might think "The last thing I need to do is add to my mortgage." but think about this.  The amount of money he now saves from the conversion is more then the increase to his mortgage.  Another big difference is one day he'll pay off his house but if he didn't convert he'd still be paying his ever increasing power bills for the rest of his life.

If, after reading all this, you say to yourself "But it is all to hard!" or make up some other excuse then do me a favour.  Don't blame the President of the USA when you are at the pump and don't whine about your power bills at home.  You choose to drive a gas guzzling people mover and complain about gas prices then  STFU about the price of petrol.

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