Archive for the ‘Gas’ Category

Gas Pains Have Just Begun

(Star Tribune Newspaper business section, article by Joanne Huist Smith, Dayton Daily News)

DAYTON, OHIO – As gas prices rise toward $4 a gallon, more bad news is on the way. Crude oil prices driving up the cost of gasoline also bump up the cost of thousands of other products either made with oil or shipped by it.

Everyday items made with oil include everything from the coloring in your toothpaste, to shampoo, plastic water bottles, house paint and even golf balls….

The 308 million people living in the United States consume 19 million to 20 million barrels of oil per day, (according to Wright State University Prof. Riad Ajami, director of the Center for Global Business at the Raj Soin College of Business.) Less than half, 7 million to 8 million barrels a day, is produced in this country.

“We drive from our living room to our bedroom. We hold two plastic bottles in one hand and three in the other. We are an energy-dependent economy,” Ajami said. “We can become stewards of our own destiny and consume less. We either do it for ourselves, or someone is going to be competing with us for these resources, and the prices are going to continue going up.”

The rising cost of crude oil stems from greater demand in expanding economies in India and China, said John Felmy, chief economist for the Washington, D.C.-based trade organization American Petroleum Institute.

“People wonder why we’re competing for resources,” Felmy said. “We believe firmly that we could produce more oil in this county that would generate jobs and improve our national security. In Washington, nobody agrees on anything and that makes it hard to move forward.”

From the grocery store to home repairs, American consumers and retailers are feeling the pinch.

The U.S. Department of Agriculture predicts the price index for food will jump 4 percent in 2011, compared with last year. About 10 cents of every dollar spent on food at a grocery store is the result of energy or transportation costs.

Rob Bernhard, owner of Dot’s Supermarkets, said rising gas prices have an immediate effect on what he spends on the delivery of goods to his grocery stores in Kettering and Bellbrook, Ohio, because of fuel surcharges from his suppliers.

“When fuel goes up, everything goes up. It really doesn’t matter what the product is. Everything is delivered by fuel,” Bernhard said. “We’re conditioned to $4 a gallon. It’s not going to go down. There is no glimmer of hope.”

(full article at http://www.startribune.com/business/120397644.html)

Our Take:
The prescription for our nation’s gas pains is more domestic production of energy. Why compete with China and India for oil when we see how it harms both the environment and the economy.

“When fuel goes up, everything goes up,” says one source in this article, and it’s a truth that became evident in 2008 when the price of crude oil drove the price of everything up, until the entire world economy stalled.

This is not the time to make transportation energy more expensive by removing the ethanol tax incentive, which could cause America to rely even more heavily on foreign oil. If anything, this is the time to invest in every avenue of domestic production of energy–our economy and our environment depend on it. A relatively small amount now (say $25 billion dollars in a federal budget that exceeds a trillion dollars) would bring many-fold returns from job creation and economic activity–think of America keeping two thirds of its transportation energy dollars instead of exporting them to OPEC nations.

Now is the time to push ahead with all biofuels–conventional and advanced–and biofuel infrastructure and flexible fuel vehicle production. Corn ethanol created a 15 billion gallon per year industry in less than ten years, and with the right incentives, cellulose-based ethanol can do the same.