Some thoughts on a gallon of gas

DAVID S. KERR / Stafford County Sun
Published: March 12, 2008

That was a lot of money back in 1919, but fortunately, the U.S. supply of gasoline, thanks to exploration, increased faster than the demand. Prices stayed low.

This began a trend, that while gas prices continued to increase, they did so at a rate considerably slower than that of other commodities.

In the 1970s the gas price hit another landmark, crossing the 50-cent mark. In a few more years, it reached a dollar, and in a 30-year rise, broken with many ups and downs, but always trending upward, the price now averages $3.15 per gallon.

The increase is easy enough to understand. World demand, not just from the west but also from rising nations like India and China, has grown sharply in just a few years, and the Arab states, joined by other oil producers like Venezuela and Russia, can only produce so much.

The overall supply is limited. What's more, they don't want to produce much more. If they did, the average price would drop and so would their receipts.

Russia, though an oil consumer itself, has made its economic comeback based on selling oil. Thanks to oil receipts, Russia's oil and gas monopoly has pumped tens of billions of dollars into the government's coffers.

They are now flush with cash. That's not bad for a nation that just a decade ago had to seek a bailout from the International Monetary Fund.

Of course, other issues, such as a militant Iran, the war in Iraq, Hamas, and a host of other flash points in the Middle East don't help either.

They just create more concern that something might happen to interrupt oil supplies and push prices even higher.

With the price per barrel of oil here having crossed a once-unimaginable $105 a barrel recently, $4.00 a gallon isn't entirely out of the question. However, we Americans locally, when it comes to what we pay for a gallon of gas, have it surprisingly easy.

That fact really doesn't help when you're watching fuel costs eat away at your bottom line, or are simply trying to pay your own bills, but it's still interesting.

Take Northern California for example. For a host of reasons, to include local supply problems and California taxes, consumers there are already paying $3.50 a gallon.

In Hawaii, where all gasoline has to be shipped at least 2,500 miles before it reaches the pump, the price has hit $4.13.

Great Britain has always paid a hefty price for fuel. I was paying the equivalent of $3 or $4 a gallon back in the 1970s, but since they sell gasoline by the liter (a wonderful marketing idea) it didn't seem so bad.

That is, until you took the time to work through the liter to gallon conversion and adjust for the exchange rate.

Then, I recalled being speechless once I realized what I was paying. Today, doing the same conversion, and accounting for a weak dollar, I came up with a figure of $7.73 a gallon.

If I still lived there I think I would opt for the smallest, most fuel efficient car there was, which is what a lot of people do, and oh yes, take the train every time I could.

If you want a really extreme situation, you need to consider the price of gasoline in a remote location. Say, the mother of all remote locations, McMurdo Station at the South Pole.

According to one estimate the price of a gallon of gas at that outpost works out to about $40 a gallon.

That no doubt puts a crimp in anyone's desire to go joy riding around the ice shelves.

On the other hand, if you're in an oil-rich country, the price of a gallon of gas can seem a lot more reasonable.

Venezuelan drivers pay about 40 cents a gallon and drivers in Kuwait and Saudi Arabia pay between 78 and 90 cents a gallon.

Alas, in the short term here, there is very little we can do about the price of gas. Conditions in the world may change some, prices may retreat for a while, but all the economic and political forces are pressing what we have to pay at the pump further upwards.

It's doubtful that we will ever have to pay as much as the British, but certainly the days when gasoline was comparatively cheap and lagging behind price growth in other commodities, are just about over.

David S. Kerr is an Aquia resident and a former member of the Stafford County School Board. Contact him at info@stafford countysun.com

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