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Why does gas cost so much?

Sy Ward fills up her car in Lee County Tuesday afternoon. Gasoline prices have steadily increased during the past few weeks, causing heated debates in the political forum.

Sy Ward fills up her car in Lee County Tuesday afternoon. Gasoline prices have steadily increased during the past few weeks, causing heated debates in the political forum.

ALBANY, Ga. -- It's been said that nothing is for sure except death and taxes, but should we add to the list the rising price of gasoline? And what are the factors that send them through the stratosphere? Economies rise and fall and elections are won or lost over dollars paid for a gallon of gas.

Perhaps because they would like to take back the presidency in November, Republicans try to hang high prices on the Obama administration.

"They want higher energy prices," said presidential hopeful Rick Santorum recently, accusing Democrats of pushing alternatives to oil. "They want to push their agenda on the public."

Newt Gingrich, on Twitter Friday, said that "gasoline prices are unacceptable. We can do better." Gingrich calls for gas prices of $2.50 a gallon with the rallying cry "Drill here. Drill now. Pay less." Is it really that simple?

Economist and former Labor Secretary Robert Reich said oil prices are rising for three reasons. The first is on the supply side. According to Reich, Iran's decision to cut oil exports to Britain and France in retaliation for sanctions put in place by the European Union and the United States have been sending up crude prices for weeks.

On the demand side is rising hopes for a global economic recovery. Reich said this would mean increased oil consumption. Greece's pending bailout deal is calming financial nerves, Europe's debt crisis shows signs of easing, as the U.S. economy is starting to improve.

According to Reich, the third reason is the overwhelming bets of hedge funds and other money managers that oil prices will rise on the basis of the first two reasons. In other words, speculation drives oil prices.

Republicans blame Obama and his reluctance to drill in the Gulf and in protected regions. Reich -- and many to the left of center -- say speculation should be more regulated and that Republicans are bankrolled by the speculators. Where's the truth?

At the issue's heart of hearts is the simple fact of supply and demand, many say. If you have something someone wants, and it can't be found just everywhere, you can charge more for it.

Jeffrey Humphreys, director of economic forecasting, Terry College of Business, UGA, said that's the biggest part of the picture.

"I don't fault Obama that much with the higher prices," Humphreys said. "It's mostly about how much product is out there, who is competing for it and what they're willing to pay. A lot of countries who didn't buy much oil before have been developing through the years and are using a lot now -- like China. At least we still have product out there."

Humphreys added, however, he thought the Obama administration did have "some culpability" for the higher gas prices in his "resistance to increased drilling."

"I'm not a big fan of Obama," Humphreys said. "To be fair, he hasn't cut back any drilling, but then he hasn't really increased it, either. I think he could have done more to keep prices down, but not by a lot."

A similar position to Humphreys is shared by Albert Danielsen, director of The Bonbright Utilities Center, Terry College of Business, University of Georgia. Danielsen is big proponent of drilling on home territory.

"The big thing by far is the price of crude in the world market," Danielsen said, "although I believe the Obama administration is far too conservative about drilling. Consider that every gallon of oil we fail to produce domestically is one we have to buy on the world market. I believe, for example, that he overreacted to the BP oil spill in the Gulf."

Danielsen believes, he said, that Obama puts too much faith in alternative energy sources such as solar, wind and hydrogen calling them "wealth wasters" and "not ready for prime time. According to Danielsen, carbon-based energy sources make the most sense for many years to come.

"I really believe that 100 years from now we'll still be using gasoline to power cars," Danielsen said. "There may be other things we're doing to power them -- natural gas, for example, but we'll still be using some gasoline."

Danielsen definitely swims against the political "green stream" when it comes to carbon energy and its potential effect on the earth. He supports coal as a viable energy source and is only marginally receptive to the idea of global warming.

"Let's say I'm suspicious of the motives of those who promote it,"Danielsen said.

According to Danielsen, it may even be possible that petroleum is somewhat of a renewable resource, citing the view by "some Russians," that petroleum is actually not a fossil fuel at all but a chemical reaction taking place deep within the earth. If that's the case, then maybe all we need to do is dig a little deeper.

Comments

tywebb 2 years, 5 months ago

can people really not take a 5 minute break from their phones? Seriously? you have to have your phone in your hand while you pump gas? it's like my 1 year old and his pacifier!

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