Anyone who drives has developed a bit of 'shell shock' when it comes to the prices posted on our gasoline pumps. Fluctuations of ten cents a gallon are not uncommon. Unfortunately, those fluctuations tend to be smaller when prices go lower and larger when prices go higher...or so it seems.
We see gasoline prices increasing on a regular basis and we see nothing happening that will change that trend. We're not building new refineries because the costs of complying with all the regulations makes that a foolish investment. There are oil fields available but we're not drilling. Even if we drilled and found more oil to get the cost down from $100 per barrel, we simply couldn't find refining capacity to handle the new crude. We're actually losing refinery capacity since it is even too costly to modify some of the existing refineries to stay in compliance with the constant flow of new regulations. Two such refinery closures happened in Illinois. Does it seem reasonable that those closings caused us to pay higher prices? I think so.
Congress is now in the process of creating new rules, and economic analysis indicates that our $100 per barrel oil costs will very likely move up to $200 per barrel as the result (according to a commentary published in the Washington Times today). That could mean that we'll be paying $6.00 or more per gallon of gasoline. Of course the environmentalists like that thought since they seem to believe we should all be using horses and buggies. Think of all the 'fertilizer' that would yield.
There are 17 different boutique fuels in the U.S. and that means more than 50 different gasolines when we look at the three different grades available. Those of us in Southeastern Wisconsin have the pleasure of being forced to use one of those boutique blends. It costs more and it delivers 10% or worse gas mileage. We could significantly ease the cost levels of gasoline in our country if we simply did away with those boutique blends...and that could be done overnight!
Our old friend ethanol comes into this equation, too. Congress is considering mandating the use of 36 billion gallons of ethanol by 2025. Existing ethanol mandates have already caused refineries to cancel 40% of planned expansions since less oil will be needed. This is further exacerbated when we admit that ethanol blended gasoline produces less energy per gallon than regular gasoline. Ethanol means we need more refining capacity but it is causing exactly the opposite to occur.
The economic impact of these actions is estimated to be the loss of $1 trillion in economic output and the loss of some 5 million jobs.
We need a lot less ethanol, more refineries, more drilling, less regulation and far less government interference in this marketplace. Fat chance of that happening, huh?
