Everywhere you turn these days there are stories about the high cost of petroleum and petroleum byproducts, particularly gasoline. In May of last year the average cost for one gallon of gasoline was $2.10, today that cost has risen to approximately $2.90. The causes of this increase in gas prices is multifaceted, which can be explained through a simple understanding of supply and demand.

Demand for oil has steadily increased with vibrant economies both at home and abroad, particularly in East Asia, and Eastern Europe. At the same time there has been increased volatility and other factors that have led to shortages in supply, including: Hurricane Katrina, violence in Nigeria and the ongoing nuclear confrontation with Iran. A number of environmental factors have also come into play. Specialized fuel blends, required in many US states, have driven up costs, along with the fact that refining capacity has remained constant in the US over the last 30 years, while demand has skyrocketed, leading to bottlenecks that have limited the availability of gasoline for consumers.

Regardless of this politicians, particularly on the left have sought to castigate the president and assign blame to any and everyone, so long as it benefits them politically…but are gas prices truly the headache the media and politicians make out? According to CNN consumers are feeling the “pinch” and are being forced to make drastic changes.

A recent ABC News story recounted the experience of one New York based reporter and how cost would impact his family vacation. This reporter regaled his audience with the story of his family vacation from Syracuse, NY to Cape Cod. According to the reporter, if he were to make the same trip this year the additional gasoline costs would total over $40 and the additional costs for lodging and meals (assuming an imbedded gasoline increase) would bring his overall additional expenses to $105, on a vacation that cost just over $1000 last year. Are we to believe that someone planning to spend $1000 on a vacation is incapable of doing so because of an extra $100? Are we to believe that this 80 cent per gallon increase over the past year will truly force individuals to change their lifestyle? Anyone who is forced to cancel a vacation because of a $100 price increase probably shouldn’t be going on vacation in the first place.

For a driver who’s average tank size accommodates 12 gallons of gas, the average cost of a fill-up has increased from $25.20 to $34.80, yes a significant increase proportionally speaking, but insignificant in the grand scheme of things, no one’s life is going to be dramatically altered because they have to spend an extra $9.60, if so then they didn’t have much of a lifestyle to speak of in the first place. Anyone who is adversely harmed by these prices should take this opportunity to assess choices made in their lives, the choices that led them to reel in pain because of an extra $9.60; clearly the choices made in life weren’t so good. Perhaps every American should forgo that fast food meal, or other extraneous and wasteful spending. With American debt up 33% in the last 2 years, clearly it isn’t gas prices that American consumers have a problem with, its their reckless spending habits.
http://money.cnn.com/2006/05/18/news/economy/retail_gas/?cnn=yes