Told ya so

They said it was just a fluke, that it wouldn’t happen again. They were wrong. Oil prices are on the rise and so are gas prices. There are solutions.

Oil prices and gas prices don’t have to rise at the same time. Back when Hurricane Katrina hit oil prices didn’t rise, but gas prices did. Why? Because the production of oil stayed the same, it was only the refined crude, gasoline, that we didn’t have enough supply of, causing an increase in prices. So, why are the prices of oil and gas rising again? And, what can we do it about it?

Yes, there is the global geopolitical risk that we all face and Iran is raising its ugly head. But summer is encroaching and along with summer comes hurricane season.

According to Marilyn Radler, Senior Editor of Oil and Gas Journal, back in the 1970s, the United States refined most of its own crude with all of its 279 oil refineries. Today, there are only 131 oil refineries. That would work if America had gotten off of some of our dependence on gasoline, but we haven’t. Our dependence on foreign oil alone has increased from 203,000 barrels a day in 1974 to 498,000 in 2004.

Because we have allowed the number of refineries to decline we have had to import refined gasoline. The average barrel of oil maybe $70 a barrel, but the average barrel of crude is only $55, while the average barrel of imported gasoline (refined crude) is somewhere around $85. If America refined its own crude it would cost about $15 less a barrel.

The increase in gasoline prices started last year after Hurricane Katrina. The demand was high and fear was escalating. The oil companies did what they had been fighting against; they bought all the ethanol they could get their hands on and started the E10 escalation. Ethanol traders had been sitting at the knee of the master and immediately raised the price of ethanol to equal the price of gasoline. To this day, ethanol is as expensive as gasoline.

E10 is being mandated in the United States. There is not enough ethanol being produced in the United States to meet the demands. Therefore, ethanol is being imported at a very hefty price of at least 54 cents a gallon above the domestic price, plus shipping and other tariffs.

We need more refineries if we want to cut the price of oil. We need to take the import duties off the imported ethanol. The idea of creating our own fuel for transportation is a perfect idea. We’re a brilliant nation with all the technology to do that. But were cutting off our nose to spite our face if we add tariffs on one fuel just because it is supposedly cutting into the demand of something that doesn’t exist; enough domestic ethanol to blend all gasoline with 10 percent of ethanol.

The one thing the President didn’t tell the American people about how we could get off the dependence of foreign oil is by using less. Oil and gasoline are only going to get more expensive. The less imported refined crude we need, the less ethanol we’re going to import to blend with it. It will take time to create enough ourselves for all our motor needs, till then we need to do all we can to keep the cost down.