The high price of cheap gasoline|
by Tex Pitfield
Georgia Online News Service
Just a few months ago, you could not find gasoline at $4.25 a gallon. If lucky enough to find it, many of us driving larger vehicles were cut off at $100, the credit card limit at many stores, whether your tank was filled or not.
What joy to now buy the same amount for under $40.
But while it may appear to be a good thing, cheap gas is an onerous cloud hovering above us all.
Gasoline in many countries overseas is well over $10 a gallon, much of the cost taxes. As a result, the highways are superb, as well as the rail systems, especially in Europe. Meanwhile, our infrastructure is a mess.
While $1.70 per gallon gas is a good thing for our wallet, it will take an extended amount of time for it to have any benefit on the economy. Growth will undoubtedly be dismal for a number of months, more likely several years.
Meanwhile, we will pay a high price for cheap gas. At $4.25 a gallon, we all focused on fuel efficient vehicles and alternative energy, electric cars, hydrogen fuel cells and solar and wind power.
Many of those alternatives have become, almost overnight, economically unviable.
Bio-fuel has become a non-event simply because it is now so much more expensive than fossil fuel. Ethanol producers can't give their product away, despite massive federal government subsidies. Some producers are already in financial straits.
Oil refineries are reducing production for the simple fact they can't make money with oil at its current cheap level. Many of our potential new energy sources, such as tar sands in Canada, are no longer cost-competitive.
And so we are creating future shortages, although it may take a long time to be realized. The speculative world (the same guys who drove crude to $146 a barrel this summer) are now filling huge crude oil carrier ships and anchoring them offshore, waiting for the price increase and their next fortune to be made, once again at our expense and to the detriment of the economy.
As we gleefully fill our tanks at unseen cheap prices, let's not forget that we are far from out of the woods.
Tex Pitfield is the president of Saraguay Petroleum, a gasoline distributor in Atlanta. [full bio]