After driving with the needle on empty for a few days, I finally dragged my Toyota Camry to the gas station where I grudgingly put $62 worth of gasoline into the tank. The price of gas has visibly impacted the quality of my life since returning home from college and I know this to be true – gas is expensive so I stay home. I don’t do anything at home so the laptop and T.V. become my best friends. My real friends stop calling because they know I won’t go out and my jeans stop fitting because I don’t exercise. Sometimes I think my issues are bigger than gasoline…
This past Tuesday President Obama and Governor Romney clashed their wits and knowledge for the second time while debating on issues and questions brought up by the audience. One segment in particular grabbed my attention – the topic of energy was being discussed when Romney mentioned the surge of gas prices in recent years, attributing them to the failure Obama’s energy policies/strategies: “The proof of whether his (Obama’s) strategy is working or not is what the price is that you’re paying at the pump”. Romney also stated his plans to increase domestic oil drilling and bring in a pipeline from Canada in order to become more energy independent and make oil cheaper for U.S. citizens.
But realistically, how much can the President of the United States affect the price of gas we desperately need? Would an increase in domestic oil production help? During my quest to understand these issues, I stumbled across some important facts that changed the way I thought about gasoline. First is that crude oil (refined to make gasoline) is a global commodity, the value of which is primarily determined by supply and demand and speculation on an international scale. The value of oil continues to rise because of an increase in demand (particularly in China, India, and Brazil) and a decline or lack of growth in supply (oil that is available). Second, the price of oil is determined by speculators and investors betting on its value at a future date. For example, in regions with volatile governments or political strife, speculators might bet a higher price for oil in the coming months, anticipating internal factors that could make oil tougher to extract from the region.
The president, therefore, has little power over the price of our gasoline since crude oil is a global commodity whose value is determined by market factors he cannot control. Even if he increased domestic oil drilling, the amount of oil produced in America would only add a drop to the existing supply of oil in the world – not enough to decrease its value by any significant amount, although it would bring us a step closer to being energy independent.
I think the most important fact we must accept is that as long as we depend on oil as our primary source of fuel, our gas prices will continue to be directly affected by political strife in states as far away as Nigeria and Iran – a true testament to the ever binding effects of globalization. I’m slightly nervous yet excited to see how the United States will respond to this challenge during the next president’s term. In the meantime, I’ll be getting used to my fuel gauge reading empty.