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The Evils of Cheap Gas

By       Message Tex Pitfield     Permalink
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Just a few months ago, you could not find gasoline at $4.25 a gallon.  If lucky enough to find it, many of us driving larger vehicles were cut off at $100, the credit card limit at many stores, whether your tank was full or not.

What joy to now buy the same amount for under $40.

The price of gasoline is ridiculously cheap, when in comparison a gallon of gas in 1918 was the equivalent of about $5.50 and in the mid 60's sold for about $2.20.  No other base commodity we rely on has seen its value drop over the years.  In reality, that gallon at $4.25 was a steal. 

But while it may appear to be a good thing, cheap gas is an onerous cloud hovering above us all.

Gasoline in many countries overseas is well over $10 a gallon, much of the cost taxes. As a result, the highways are superb, as well as the rail systems, especially in Europe. Meanwhile, our infrastructure is a mess..

While $1.70 per gallon gas is a good thing for our wallet, it will take an extended amount of time for it to have any benefit on the economy. Growth will undoubtedly be dismal for a number of months, more likely several years.

Meanwhile, we will pay a high price for cheap gas. At $4.25 a gallon, we all focused on fuel efficient vehicles and alternative energy, electric cars, hydrogen fuel cells and solar and wind power.

Many of those alternatives have become, almost overnight, economically unviable.

Bio-fuel has become a non-event simply because it is now so much more expensive than fossil fuel.  Ethanol producers can't give their product away, despite massive federal government subsidies. Some Ethanol producers are already in dire financial straits, while still receiving these subsidies..

Oil refineries are reducing production for the simple fact they can't make money with oil at its current cheap level. Many of our potential new energy sources, such as the Athabasca Tar Sands in Canada and new fields in the Gulf of Mexico are no longer cost-competitive, and only become so with Crude Oil around $80.

And so we are creating future shortages, although it may take a long time to be realized.  The speculative world (the same guys who drove crude to $146 this summer) are now filling huge crude oil carrier ships and anchoring them offshore, waiting for the price of crude to increase and their next fortune to be made, once again at our expense and to the detriment of the economy.

As we gleefully fill our tanks at unseen cheap prices, let's not forget that we are far from out of the woods.

 

 

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Anthony C. "Tex" Pitfield was born in Montreal, Quebec, Canada. In 1962, his family moved to a working cattle ranch in southern Alberta, (just north of Montana), where he grew up in a cattle and equipment oriented lifestyle until his early (more...)
 

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