is part of the Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

  • American Agriculturist
  • Beef Producer
  • Corn and Soybean Digest
  • Dakota Farmer
  • Delta Farm Press
  • Farm Futures
  • Farm Industry news
  • Indiana Prairie Farmer
  • Kansas Farmer
  • Michigan Farmer
  • Missouri Ruralist
  • Nebraska Farmer
  • Ohio Farmer
  • Prairie Farmer
  • Southeast Farm Press
  • Southwest Farm Press
  • The Farmer
  • Wallaces Farmer
  • Western Farm Press
  • Western Farmer Stockman
  • Wisconsin Agriculturist

So why higher gasoline prices if the world is awash in oil?

A couple of months ago, I was buying gas at a nearby convenience store for $1.33.9. When I passed the station this morning, pre-daylight, it was $1.63.9; at noon, it was $1.81.9.

With world oil prices steadily falling, at one point dropping under $35 per barrel, why the 48-cent increase?

As far as I can determine, there has been no shortage of oil or gasoline; in fact, despite OPEC reducing its output, the worldwide financial crisis continues to dampen petroleum demand, so much that huge oil tankers have been parked at sea, and the Energy Information Administration has forecast a decline in world oil consumption of 800,000 barrels per day in 2009.

No supply interruptions have occurred; tensions rose in the Mideast as a result of the battling between the Israelis and Palestinians, but there are no reports of any interference with oil shipments in the region.

No hurricanes or other natural disasters have occurred; the extreme winter has increased demand for heating oil in northern states, but not enough to cause such a spike in gas prices.

“Because they can,” a co-worker surmised as the reason for the oil companies pushing prices upward.

Actually, industry observers say, the reason for the increase is that U.S. refiners weren't making enough profit, so they cut supplies and raised wholesale prices (it would be churlish, one supposes, to wonder what happened to the billions in profits refineries were raking in not so long ago).

Analysts say each 1-cent increase in the price of gasoline takes $1 billion away from spending by U.S. consumers on other goods and services.

All of which emphasizes even more the volatility of anything petroleum-based and the urgent need for this country to get busy and try and atone for the last three decades of doing basically nothing to free us from imported oil.

Which is going to be done, says our new president, Barack Obama, who took one step in that direction with new federal rules requiring auto companies to develop vehicles that get more miles per gallon and are less polluting.

Which was met with the usual moaning and groaning by auto manufacturers, who recently trooped to Capitol Hill to seek billions in government bailouts, and who contend the requirements would further push up the cost of vehicles that they can't sell anyway because people don't have jobs or can't get credit.

Horse apples, say engineers and other experts who know the industry — manufacturers already have the know-how and technology to meet higher mileage standards, but they've ignored fuel efficiency in favor of cranking out high profit, high horsepower, gas-guzzling SUVs and pickup trucks that buyers now don't want.

Some industry analysts say the additional cost per vehicle would be only in the $400 to $800 range, which would be recouped in fuel savings over two years, even with gasoline at $1.50 per gallon.

It's expected the manufacturers, despite their protests, will comply in order to stay on the good side of their lender of last resort, Uncle Sam.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.