The cause of the rising price of gasoline is a never ending debate. Some say that its due to governmental regulations which limit the amount we can drill for here at home. Latest statistics show we import 51% of our oil in this Country. Does that mean if we have more domestic production the price of oil will drop? We currently produce about 7% of the world supply of oil so if we increase production or supply of domestic oil will it really have that big of an effect on the price world wide? I have read that for every $10.00 increase in cost per barrel of oil the gasoline price increases about .25 a gallon. Depending on which political party you side with it seems that there is no clear answer. The democrats say increased production and fewer regulations will not lower gas prices significantly. Instead they say we must become more efficient with better sources of energy besides oil. They cling to wind, solar, and electric as sources we need to perfect in order to reduce our out of pocket expenses for energy. Republicans believe that opening up more domestic markets will bring the price of fuel down and other energy costs as well. Taking many of the EPA regulations off the books will also have a positive impact. What are we to believe?
When these types of questions come up it usually helps to use some common sense and past history as a basis for actions. Back during the Carter years and oil embargoes the price was about .36 a gallon and was difficult to get. This may seem cheap but by comparison new homes were $26,600 and the price of a stamp was .o6. Using this information one would feel that an increase in domestic production should lower gasoline prices. However we as a country are currently EXPORTERS of gasoline. It seems the bad economy along with efforts to conserve gasoline have made many refineries sell to other countries where demand is bigger and larger prices can be had. (China and India are examples). So what now? Well there is evidence that increase production still will bring down the price. In our country we are experiencing a dramatic drop in natural gas prices due to increased supply. This supply jump is due to new and more efficient ways (read more profitable) to mine natural gas here at home. At to the fact that when wheat prices drop from good growing years we see a decrease in the price of bread. Remember the driving issue for any company is profits and margin. If we can create a gasoline market here at home where profit margins meet or exceed those created by selling to other countries then we will see prices drop at the pump. Remember its profits that drive businesses.
Common sense would then indicate that increased supply domestically along with less regulations on U.S. oil companies (which cost money and decrease profits) along with lower taxes on same would drive prices down while maintaining or increasing profits to producers. Remember that this increase also helps many of your 401K’s and pensions that invest in Oil companies. Increase drilling also creates more jobs at home which helps the economy and will replace those taxes lost by lowering corporate rates. And by lowering the cost of fuel you decrease shipping costs on all goods within the Country and thereby lower the costs of these goods to the consumer.
Its just common sense……maybe we need more of it!


