When my friend Michael told me over lunch yesterday that he has to pay $71 twice a week just to cover his commute to work I was surprised. But with gas prices skyrocketing, what are average Americans supposed to do about the cost of gas?
Rural areas that do not have public transportation, where there is no carpool are also suffering from this gas rate increase that seems like it has no end. People who have farms are heading into debt over it. Airline tickets are going up, even doubling because of fuel costs. In addition, the soaring gas prices affect everything including food distribution, restaurant prices, large and small grocery stores and bakeries. This translates into higher prices at these establishments at the very time when consumers are saddled with a new monthly premium for travel, as my friend experienced. This cost along with the frequency of the internet has created websites like GasBuddy.com which is a search engine for gas stations in America and Canada. By entering a location, a traveler can see the lowest regional gas prices and how to get to those stations. My research on this site suggested Chevron and Shell have some of the higher prices across the country.
Mobil and Exxon also had higher average prices in many major cities. It's a double whammy with these two gas stations because they have merged into one enormous conglomerate. According to a February article on the news site Breitbart.com, "Oil giant Exxon Mobil Corp. on Thursday posted the largest annual profit by a U.S. company-$39.5 billion-even as earnings for the last quarter of 2006 declined 4 percent. The 2006 profit topped Exxon Mobil's own previous record of $36.13 billion set in 2005. Revenue at the world's largest publicly traded oil company rose to $377.64 billion for the year, surpassing the record $370.68 billion Exxon posted in 2005." I have always suspected the $3.60 gallon rate is directly feeding senior executive compensation packages at companies like Exxon Mobil.
Washington politicians have suggested a gas tax holiday could solve the high prices, according to a recent Washington Post article. Reducing the federal excise tax of 18.4 cents is a proposal that both John McCain and Hillary Clinton support, especially with the summer travel months upon us. However, this is simply a drop in the bucket with the overall rise in gas prices. To add insult to injury, President Bush told reporters in the Rose Garden today that, "Congress is blocking his proposals to deal with high gas prices and dragging its feet on other issues to address the nation's sagging economy," according to the Associated Press News Service. The President claimed to be open to the McCain and Clinton proposal to suspend gas and diesel taxes this summer. However due to his low approval rating and the Congress' focus on who will be the next president, it is hard to see how anything will get done.
However, this gas tax holiday would deplete state highway trust funds, creating a deficit there. According to the Energy Information Agency, "the U.S. average retail price for regular gasoline jumped 9.5 cents a gallon over the last week, to a new high of $3.60 a gallon." So daily commuters are paying the price and having to make calculated efforts to curtail their driving this summer. That might mean a trip to see Aunt Bessie in Atlanta is now out of reach for someone's summer plans.
Meanwhile, OPEC's president is weighing in about the rising cost of fuel and suggests it could get even higher in the months to come. A Financial Times article reports that oil could hit $200. With a weak U.S. economy, the dollar is at a very low rate and that affects the pricing of oil, making it go up to it's current price of $120.
OPEC's President Chakib Khelil says, "The prices are high due to the recession in the United States and the economic crisis, which has touched several countries, a situation that has an effect on the value of the dollar. Each time the dollar falls 1%, the price of the barrel rises by $4 and of course vice versa."
So what is the solution? Some U.S. Senators blame high oil prices directly on OPEC, the Organization of the Petroleum Exporting Countries, and Saudi Arabia (its largest member) for the high fuel prices. In a letter to President George W. Bush last week, they said Riyadh had cut its oil production by about 2 million barrels a day over the past three years, even though oil prices had continued to rise.
Khelil counter argued this point in an interview with El Moudjahid, Algeria's government newspaper: "I don't think that an increase in production would help lower prices, because there is a balance between supply and demand and the stocks of gasoline in the United States have recorded a surplus and are at their highest level for five years."
