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Here We Go Again – Up Up and Away With Oil Prices!

February 20, 2011

Dateline: February 20, 2011

To my friends, colleagues and associates in renewable and sustainable energy,  this may be the shortest and strongest discussion I wrote to say it as it is.

To see the charts and graphs discussed in this article, please go to:

Regular grade retail gasoline jumped to over $3.00 a gallon in all regions of the U.S. Cities in California are experiencing prices well over $3.00. As the chart shows Gulf Coast is hovering around $3.00 while the east Coast is approaching $3.40 per gallon. Source: Source: U.S. Energy Information Administration, EIA-878, Motor Gasoline Price Survey; http://tonto.eia.doe.gov/petroleum.

So what is so surprising that the price of crude again is surging to ever higher limits? Why should Americans be concerned? It has happen many times in our past only to fall to acceptable limits within a short period of time. Like those who don’t believe in Climate Change, this price surge can only be a natural market phenomenon that will only correct itself in due course.

Similarly, this belief must be shared by our government. They take either no action or poorly conceived short-term knee jerk reactions. Do you think any public official would really provide legislation to eliminate the oil industry’s incentives that keep the price of petroleum artificially low or take an even more unpopular move like taxing the heck out of oil to keep the price at a reasonable high level like our European partners do? Why develop a short- and long-term energy policy that stays the course. In this way, our elected officials don’t have to stretch their necks out only to bear a backlash at the polling booth when the price falls for some unknown and seemingly lucky reasons.

In trying to figure out how best to get an honest picture that represents these at-the-pump gasoline price fluctuations, it was necessary to design a new measuring scheme. To make a long story short, the following chart shows the yearly percent change (%) in average yearly retail petroleum price per gallon, adjusted to 2010 dollars by the Consumer Price Index (“CPI”).  I used data from the EIA and a cool CPI calculator that takes a dollar value for any given year and coverts it to another value representative of any other year the user cares inputs. The calculator can be found at http://www.bls.gov/data/inflation_calculator.htm. Due to the extrapolations required to derive the figures in the chart, there could be some error, which may not detract from the overall message given by the chart.

You can see the chart the oil crisis of 1973, which other than the huge lines and fear of running out of petroleum by the 1990’s, is paltry in comparison to today’s prices. Also, the alarming spike in the early 80’s, which should have been a call to action if not a war against fossil fuels, was followed by a 20-year period of relatively low prices and complacency by the public and private sectors. So here we are again. Sure enough the third oil crisis of 2008 dissipated as quickly as it flared up.

If we could make the bomb in a few years, don’t you think we can do something now, no less after 40 years?

I could go on and on and on. When are we going to learn and do something? One could argue that America is on the right path to turn off the valves, cork the wells and halt the supply of foreign oil. I guess one may still be able to say the moon is made out of cheese.

If not too late, the U.S. needs to eliminate most if not all federal agencies purportedly devoted to energy and renewable energy and like the Manhattan district, treat the issue like the war it is, and combine all the resources under one roof as a new Office within the Department of Defense.

And that’s the way it is, today February 20, 2011!

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3 Comments leave one →
  1. February 21, 2011 1:52 AM

    Barry,
    thank you for this excellent background information.
    Please let me add another graphics on the same topic,
    where you can follow the development of the crude oil price
    from 1947 to 2008 in connection with major political events:

    More:
    http://www.hydrogenambassadors.com/background/crude-oil2.php
    This is the pdf:
    http://www.hydrogenambassadors.com/background/images/crude-oil-prices-1947-2008.pdf

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