Wednesday, May 23, 2007

Putting Things Into Perspective: Gas Prices Ain't So Bad After All!

Gas prices have once again hit a "record high," or so the media say. The national average price for a gallon of regular gasoline is $3.18, according to the latest Lundberg Survey. These days, every trip to the gas station is an experience in sticker shock. A gallon of regular gas costs $3.24 in New York. It's $3.45 in Milwaukee, and $3.59 in Chicago. The price hikes are giving oil companies another banner year. First quarter profits for Exxon-Mobil totaled nearly $9.3 billion. Royal Dutch Schell picked up more than $6.9 billion. The number was $4.7 billion for Chevron.

Drivers assume what they hear from the media is true. Most people I talk to say that gas prices are "going up and up and up, and it's the most expensive it's ever been." But prices are not at a "record high."

The media says that gas prices are breaking records for one simple, simple-minded reason: They don't account for inflation. That makes the numbers look bigger than they are.

As I write this, the average price of gasoline in the United States is $3.18 per gallon nationally and in our lovely state of super-high price gouging, a whopping $3.50+! That's relatively high, but if you account for inflation, gas prices today are about the same as they were in the early 1920's. And they're lower than the record average set in March 1981, of $3.22 per gallon.

My friends in England laugh when they hear us bitch about high gasoline prices. They've been paying in excess of $5.00/gallon for years. Here in the good old US or A, and especially in California which has the 5th largest economy in the world, the cost of gas may be on the rise, but the situation is far from "scary." Gas prices spike every year around this time -- it's part of the mythical high-demand summer season -- and prices are also higher because refineries have had trouble processing enough gas to meet demand. And of course, environmentalists have made it very difficult to build new refineries.

What costs more...gasoline or bottled water?

The answer I get from almost everyone is gasoline. At my local Conaco/76 station, water was for sale at $1.29 for a 24-ounce bottle. That's $6.88 per gallon, three times what the station was charging for gasoline at the time. And let's think about this. Most of the bottled water comes from the ground and it just really city water that's been filtered, bottled and the media has told you that it's from some mountain spring high in the Alps. Like when was the last time you saw a mountaion in Neward, New Jersey or El Monte, California? Get my point?

What costs more, gasoline or ice cream?

At $3.39 a pint, "premium" ice cream costs about $27 a gallon. And let's see, we get the milk from a cow, add a ton of sugar to it, mix it for hours, freeze it, package it, ship it, and yet we have no problem paying this much for it. Hmmmm. I guess Ben & Jerry figured it out!

What cost more, gasoline of a can of coke?
Well, a couple of weeks ago when I was in Miami, Coke was going for $1.50 out of the vending machines at the hotel I was staying at. So, if we take that figure and do the math, how stupid are we to pay over $15.00 for a gallon of Coke?

We should marvel at how cheap gasoline is -- what a bargain we get from oil companies. After all, it's easy to package ice cream, but think about what it takes to produce and deliver gasoline: Oil has to be sucked out of the ground, sometimes from deep beneath an ocean.

To get to the oil, the drills often have to bend and dig sideways through as much as 7 miles of earth. What they find then has to be delivered through long pipelines or shipped in monstrously expensive ships, then converted into three or more different formulas of gasoline and transported in trucks that cost more than $100,000 each.

Then your local gas station must spend a fortune on safety devices to make sure you don't blow yourself up. At $3.05 a gallon (about 46 cents of which goes to taxes), gas is a bargain!

I'm not trying to defend the big fat oil companies, but as a society, we are extremely satisifed and happy when we pay high amounts for ice cream, bottled water, a can of coke and yes, even my favorite coffee in all the world, Starbucks! I guess if we can put this crap into our semi-obese bodies and it makes us happy, then so be it. But what we hear from the clueless media is "Gas prices are at record highs!"