Every problem is an opportunity in disguise-"and increases in gasoline prices are no exception. First, though, you must understand why gas prices are skyrocketing, heading for the $6.00 per gallon level within a year. It's a classic supply and demand situation. Worldwide demand for petroleum products now exceeds supply, pushing up prices. And buying crude oil from certain strive-torn nations who hate us doesn't help. The United States produces only a modest amout of gasoline, and with only 5% of the world's population, we consume 25% of global gasoline, making us a large importer and a heavy user. Our jingoistic jabbering about reducing dependence on foreign oil has been a joke-"as has our non-existent national energy policy from Presidents Jimmy Carter to George W. Bush. Clearly, American consider an infinite amount of cheap gasoline one of many American entitlements. Congress offers to solve this problem with a Band-Aid--send everyone a $100 each to fill up their tanks. But it's time for realism to sink in. Crude oil production from Iran and Iraq is nil. Saudia Arabia is producing to the max, but not even this is enough. A few South American nations have stopped producing due to internal political strife and virulent anti-Americanisn. Russian and Norwegian production is down, too. China is a big factor here. Formerly an exporter of oil, now that country's growth has added substantial demand for imported oil. China's demand will keep increasing sharply for a many, many years. American oil companies have little desire to increase gasoline production. The EPA makes opening new refineries difficult, and large American oil companies are consolidating and attempting to raise earnings to the next level through increased internal efficiency measures. Though it appears that American oil companies make too much money, actually they make far too little. Their returns on equity are very unimpressive. Yet we can be encouraged by oil progress in the Kurdistan province of Iraq, the Canadian "Oil Sands" in Alberta province, new discoveries in in Colorado and other western states, and exploration of the South China Sea. Libya is back in the global oil business, having been restored diplomatically. But even if newly-discovered oil fields and sources are very productive, gas prices will still increase from current levels (about $3.00 per gallon) to $5.00 to $6.00 within a year. On Wall Street, that's a consensus view most share. I share it, too. There's no rational case to the contrary. At current price of a barrel of crude oil (a barrel equals 42 gallons), raw product cost is $1.55 per gallon. To that one must add federal and state taxes as well as the costs and profits of those in the shipping, refining and distribution systems. That's why gasoline is now $3.00 per gallon. The retail gas price will vary in direct proportion of crude oil prices per barrel--which are reflective of supply and demand. But if we're really smart, gas prices will not really matter at all. Here's why. Economists think that increased gas prices will force people to change lifestyles if household income is below $50,000, using less gasoline and undertaking less travel. However, those earning over $50,000 per year will not be required to drive less or spend less. They have much more discretionary income. What matters much more, though, is how we Americans seize the moment-"confidently or timidly. We should use the Fredrick The Great attitude" "audacity, audacity-"always audacity." He was King of Prussia from 1740 to 1778. Let's be audacious. Let's not live in the past. That would be "Soooooo 20th Century" ! Examples of audacity in action: In the 21st Century, technology lets people attend meetings, but not be there physically. Millions of telecommuters and home based business people have learned how to do just that. People use conference calls, webinars (online) and teleseminars (telephonic), as example. This story will have a happy ending--technology will help us triumph over oil supplies. It's time to show your creativity and audacity. |
