Energy Department: High Gas Prices? Get Used to It!

Photo from source, Huffington Post

On her radio program, Randi Rhodes has often tried to use logic to explain the rise in gas prices. It's one of those times where I actually had the train of thought before I heard it from her. We're told that the high gas prices are a supply and demand issue.

But that can't be. Demand is down, because people aren't buying as much (we can't afford it). Supply has not been curtailed: have you witnessed lines at the stations because others were out of gas? Didn't think so.

So, another explanation is that the price of crude has gone up. This much we know is true. But profits for the oil companies are through the roof. Logically, if the price of oil goes up, and they raise the price of gas to compensate, it should be a wash. Profits should be flat. But they aren't. A lot of the $4.25 we're spending now is boosting profits.

Right-wing talk radio is telling us that it's all the Democrats fault. They won't let us drill in ANWR! They won't let us build refineries, or drill offshore! Debate the merits of those arguments all you want, it doesn't explain why the Republicans--in charge of all branches of government until 18 months ago--didn't accomplish those things themselves.

I will freely acknowledge that I don't know anything about the speculators, or how the price per barrel gets set. I don't know what impact of Alaskan or domestic off-shore oil would have on the price at the pump--or how long it would take. But I do have a theory. I believe that the oil companies like making a certain percent of profit. And I think they want to keep that percent constant (or better). Multiplied by the number of gallons in your tank, that amounts to a hell of a lot more money for them per fill-up. Certainly more than if they kept a set dollar amount of profit. It's just a theory.

[Excerpt]

Energy Department: Get Used to It!

Motorists can expect gasoline prices around $4 gallon through next year, the Energy Department said Wednesday, with oil prices staying well above $100 a barrel.

Crude oil prices are likely to average $126 a barrel in 2009, $4 higher than this year, as oil supplies and demand are expected to remain tight, Guy Caruso, head of the department's Energy Information Administration, told a House hearing. . .

Read more at: Huffington Post