The enigma that is gas prices

The price of gasoline has risen steadily over the last seven years. People not in the know… The price of gasoline has risen steadily over the last seven years. People not in the know have been quick to blame OPEC, saying perhaps “they keep our prices up because they hate our freedom.”

Some may blame private gas station owners by claiming their greed is costing consumers at the pump. Either view, along with a collection of other shortsighted explanations for oil price increases, does not create a clear picture of the actual complex reasons for such price increases.

The truth is simply this: The most important influence on oil price is global increase in demand. China and India are becoming developed and industrialized nations. These nations’ thirst for oil is increasing so rapidly that it is outpacing U.S. demand. And up until recently, Americans had been growing ever hungrier for gasoline to power their sport utility vehicles.

Also, the future of oil markets is now at a very unpredictable time. For all we know – and many experts will agree on this – world oil production may have already peaked. That is to say that perhaps there are now fewer potential oil reserves than known ones. Such a case is inevitable; but because of this looming problem, oil is perceived through speculation as having a future value much greater than its current value.

It may not be apparent to everyone, but most oil used in the United States actually comes from the United States. So it is important to consider the profits of domestic oil companies. Exxon Mobil is a vertical monopoly of oil in the United States, controlling all aspects of oil production from exploration and drilling to refining and retail sale of gasoline. Exxon is the archetype big business – something I fundamentally oppose. The company also has heavy backing from government, specifically the executive branch.

Exxon is posting record profits, a quarterly increase of 75 percent over the last year, according to Reuters. I would agree with others who say Exxon is being greedy and inconsiderate by taking advantage of this situation. Strangely, though, I feel that Exxon’s warping of the domestic oil structure has some actual long-term benefit.

Heightened gas prices are causing American consumers to take notice and feel concern for the economy. I’ve noticed such recent references to miles-per-gallon values in car commercials to address the concerns of the consumer. Americans haven’t really cared about this information in the past. Showing concern or worry and a willingness to adapt demonstrates a great deal of maturity on the part of the American public.

I see oil price increases as wonderful news. It forces markets to adapt. For example, car companies are now interested in developing smaller and more fuel-efficient vehicles. This may spark an attitude of anti-consumption, something that America lacks dearly.

Ultimately, people must make sacrifices. As a college student, it would be very shallow-minded of me to expect all Americans to begin riding bicycles to work. It simply isn’t feasible to create hyper-condensed urban neighborhoods where everyone is within cycling distance of their workplace.

I do not live in Oakland and must commute to campus, traveling two hours both ways to and from school. I take advantage of public transit via PAT buses and trolleys.

Public transit is one step to decreased dependence on gasoline. Many have already taken notice: Public transit is at the start of a boom right now, with ridership increasing steadily each month.

Many legislators, backed by uninformed citizens, have advocated the use of artificial price caps. This action fixes the price of gasoline in an attempt to relieve economic pressure. Hawaii has already tried this – and failed. Price caps attempt to keep constant supply, but all the while increase demand phenomenally. The result is supply shortages in exchange for miniscule short term savings.

The question should not be “How can we decrease the price of gasoline?” Rather, we should be asking, “What other forms of energy are at our disposal to develop as a viable alternative?”

I am saddened to see that the latter question is not the main focus of energy policy to American citizens. It seems that their hubris is the feeling of entitlement to instant gratification – something unrealistic with something as complex as energy resources.

We need innovations: development of nuclear power adapted to a smaller scale, and the development of better fuel and solar cells to meet rising energy demands in the coming years. But most of all, we need an attitude adjustment regarding conservation.

E-mail Karim at kab85@pitt.edu.