US Gasoline Prices

[Kelvin]

There are at least two reasons why a worldwide boycott wouldn't work, 
aside from the near impossibility of implementing it:

     1) Gasoline is a fungible product. The gas you buy from the Texaco 
station is very likely to have been produced in the very same refinery 
run as the gas offered by the Exxon (Esso in the UK) station across the 
street. In other words in a given geographical market gasoline is often 
supplied to every named outlet by from one to three refiners. Each 
distributor simply dumps in their proprietary additives at its terminal 
to give their product its unique twist. After all 91 octane gasoline is 
91 octane gasoline no matter who makes it. So if you try to punish 
Exxon/Mobil by patronizing the Hess station down the block, the odds are 
you are still buying gas produced by Exxon/Mobil.

     2) The price of gasoline is driven by the balance in the supply and 
demand equation. Although the members of OPEC control less than 50% of 
the world's crude production, they can influence the price of crude. And 
they do. They cut production late last year because they thought the 
price had fallen too far. And their production cuts have brought the 
price back up. So long as no member of OPEC or a large producer who is 
not a member, like Mexico, Britain, Norway, or the US, gets cash hungry 
and begins producing crude in record quantities, OPEC will manage the 
supply to meet the demand and keep the price stable. And we'll pay the 
price no matter where they set it, so long as we live by our cars. And at 
current price levels for a barrel, the US is producing all the crude it 
can produce. However, if the price were to rise to say $50/barrel (it's 
now about $30/barrel), US producers (and producers elsewhere) would bring 
on line new supplies in the form of new wells and reopened old wells 
where the production costs exceed $30/barrel but are less than $50/barrel.

     In short there is little we as individuals can do about the price of 
gasoline, even including legislating it. To do that, which is what the 
bright lights in California tried to do with the price of electricity 
recently, is intellectually the same as the attempt a century ago by some 
members of the Indiana state legislature to legislate the value of Pi at 
an even 3, in the belief that the value 3.1416... was a plot by 
pointy-headed intellectuals to make our life difficult. 

     As far as the current price of gasoline is concerned, it's actually 
not as expensive as it was during the OPEC embargoes of the 70's when the 
price ran to over a $1.40, which would be more than $3.00 today. And even 
the prices in the 50's, when we imported almost no oil from abroad and 
gas was considered cheap, ran around 25¢, which today would be well over 
$2.00. So I really see little reason to gripe. In the US we spend less on 
gas today as a percent of our income than at any time in history. And if 
you don't like the price in the US, move to Europe. You'll like their 
prices(probably $3.00 to $5.00/gallon) even less, although those prices 
are driven by extraordinarily high taxes, at least from the North 
American perspective.

Kelvin Kean
Pennsylvania