In three years, the average price for regular gasoline in Seattle has gone from $1.26 a gallon to nearly $3 per gallon. That's a 100- percent increase or, in inflationary terms, 33 percent per year. It sort of feels like living in Argentina, or other South American countries where inflation lives in double digits much of the time.
This is not news to any of us who drive a car. We've felt the impact in our wallets, bigtime. What's going on, and where will this all end?
There's no shortage of accusations being thrown around, from the oil companies gouging the public to OPEC holding us hostage. My guess is that there's an element of truth in many of the rumors, but the answer is more complex.
There can be little doubt that the bean counters in the finance departments of the major oil companies are figuring out how to squeeze every drop of profit from every drop of oil; that's their job. There's no doubt that the oil-exporting countries are also using the situation to maximize their cash flow. But, that's not the whole story, and looking for a villain is not only counterproductive, it isn't going to the money back in our pockets.
We have a number of forces at work in the world that drive prices up. For the most part, it's the old supply-and-demand game. World oil demand, driven primarily by the United States, Western Europe and the Far East, has continued to grow faster than production.
To complicate that problem, a number of refineries in the United States had to shut down in late July, with delayed restarts causing a 4-million-barrel drop in gasoline stocks. When demand is high and supplies are low, prices go up.
For its part, OPEC is now producing at the highest rate since 1979, so there's little point in trying to blame them for rising prices. They are playing the free-market game that we've taught the world. With ever-increasing demand from China and India, comprising 2 billion people, as well as Africa and other developing nations, the future for gas prices is upward.
But all may not be doom and gloom. The rapidly rising prices of gasoline could ignite (pun intended) a change that we collectively know has to happen. We have to change how and what we drive, forcing the automobile manufacturers to produce smaller and more efficient means of transportation.
SUV sales have dropped dramatically in the past few months and are down for the year. I guess those $50-$100 fill-ups and low miles-per-gallon stats are causing the buying public to rethink their transportation needs. People who've never put so much as one wheel in the mud are reconsidering the need for a behemoth with four-wheel drive and an engine that could power a Caterpillar 953C Track Loader. I understand some men wanting these machines - it's a compensation thing - but I'm at a loss to understand the attraction for women.
People are looking at smaller cars - read that as improving traffic congestion a little - and more fuel-efficient cars, which translates into lower operating costs as well as less pollution. Does Mom really need a Chevy Suburban or a Cadillac Escalade to take Junior and his sister to the grocery store for a carton of milk?
If you look at Europe, where gas prices are equivalent to about $4.50 a gallon, they've seen the light. If you've been to Rome, Athens and other major cities there, you'll see a glut of little cars, with the SMART car dominating the scene, zipping around like so many ants, and averaging 60 mpg. Take this little monster out on the highway (it has a top speed of 85 mph) and you'll get around 68 mpg.
Drive it a thousand miles for around $36 at today's prices. Okay, it's a two-seater, and you may have room for only a change of underwear, but drive your Explorer the same distance and you'll shell out (this pun not intended) $139. Even those of us who are mathematically challenged can figure that one out.
Incidentally, the SMART car is made by Mercedes. It's selling out in Canada and is supposed to be in the United States in 2006 for around $15,000 starting price. You could buy a fleet of these puppies for the price of an Escalade or Hummer.
True, the SMART car is on the extreme end of getting small and efficient, but there are hybrid options out there right now like the Toyota Prius and Honda Civic. With oil prices continuing to climb and sales of gas-guzzlers falling, I think we'll see many more fuel-efficient options being offered by Detroit, and all the automobile manufacturers.
So while the current gas-pump mugging may be a little hard to take, it may be the silver lining on the cloud attending some of our current issues - problems like pollution and its big brother, global warming and congestion in the cities where smaller cars could mean more room on the roads.[[In-content Ad]]