[Vision2020] The Price of Gas

B.C. Strand Bill at strand.bz
Wed Apr 13 23:18:57 PDT 2005


Mr. Arnold and Mr Harkin have been arguing about the price of oil and 
gas in respect to overall cost of living. The easist way to make this 
comparison is to go out tot to a web site such as the St Louis Federal 
Reserve and download the historical data for the Consumer Price Index 
(CPI) for energy as well as the CPI for all goods and services (minus 
energy). The CPIs take into account inflation as well as relative use of 
different goods and services.

A quick comparison shows that energy costs were indeed significantly 
higher in the late 70s then they are at the present time.

As for the reason for the reason for higher gas prices - it is not crude 
oil availability. Oil inventory levels in the US are at record high 
levels (both in the stategic reserve as well as active inventories). It 
is the potential shortage of REFINED products (gas, heating oil, jet 
fuel, etc...) that have led to the high prices over the last year. Where 
30 years ago US refineries were running 80% of the time, last year they 
were running at 95% levels (and were still behind the demand curve). And 
there is very little new refining capacity planned in the US. In 
addition, the specialized summer blends of states such as California and 
New York mean that gas cannot be imported (they have to import the blend 
components).

Bill Strand







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