Are You Outraged About High Gas Prices? It May Depend on What You Know

Sunday, April 8, 2012

In a recent article in the LA Times, columnist Jerry Hirsch points out that although gas prices show every indication of rising higher than they did during the price spike in 2008, people aren't as upset about it now as they were then. Hirsch writes:

Having already seen prices cross the $4 barrier, motorists are less likely to become outraged when they see it happen again, said Michael Sivak, who heads the University of Michigan's Transportation Research Institute. And because the costs of other items have risen — notably food — it stands out less as a household budget buster.

What if people knew that the rise in food prices is largely the result of a rise in oil prices? And what if people knew that the rise in oil prices is being driven by to the urgent need of the leaders of Iran, Saudi Arabia, and Venezuela to gain enough money to stay in power? They're raising the world price of oil through OPEC so they can rake in enough money to appease their populations. Would that cause outrage?

And perhaps it is somewhat misleading to say people aren't as upset about it as they have been, because people don't know there is anything they can do about it. Most people have no idea that OPEC is the fundamental cause, and even when they do, they don't know the Open Fuel Standard could solve the problem.

It might be more accurate to say people are more used to rising gas prices, and more resigned to its inevitability.

Hirsch says The Washington Post did a recent survey:

Asked whether "recent price increases in gasoline caused any financial hardship for you or others in your household," 63% of the respondents said yes.

But that percentage was higher during the surge in gas prices in 2008. "Back in 2005," writes Hirsch, "when California gas prices were in the low-to-mid-$2 range, both consumers and politicians were more vociferous with their complaints..."

I can imagine the OPEC leaders reading about this and smiling smugly. Americans are like frogs put into a pot of cold water and heated up slowly. If the water is heated gradually enough, the story goes, the frogs won't notice and they won't bother to jump out until the water is so hot they can't jump any more.

The LA Times article ends with a quote by a man who is clearly resigned after filling up his car: "We have gotten to the point of acceptance," he said, "whether we like it or not."

High fives all around at OPEC headquarters.

OPEC leaders desperately need Americans to accept these high gas prices. Their survival depends on it. Gal Luft wrote recently that the population of Saudi Arabia, the country with the most control over OPEC, is growing very quickly. Writes Luft:

Because Saudis pay no income tax, the House of Saud will need more and more money to keep its citizens happy, and avoid the fate of toppled leaders in Libya, Egypt and elsewhere.

Since the beginning of the Arab Spring, Saudi King Abdullah almost doubled his Kingdom's budget, committing billions in subsidies, pensions and pay raises in an effort to keep his subjects from storming the palaces.

This expensive response effectively raised the price of oil needed for the Saudis to balance their budget from under $70 a barrel before 2011 to at least $110 a barrel by 2015.

Like it or not, the bill for keeping the Persian Gulf monarchies in power is now being footed by every American. Every time we fuel our car we send an extra 35 cents per gallon, or roughly $6 per fill up, to the Save the King Foundation. Since oil goes into everything we buy from food to plastics, this adds about $1,500 annually to the expenditures of the average American family.

I think most Americans would feel outrage over this, especially if they knew we could change the whole dynamic with the simple, subsidy-free OFS bill. But people don't know this. They are treated to all kinds of complex explanations about what causes high gas prices. In Hirsch's article, he writes:

In 2006, the Federal Trade Commission launched an investigation to look at whether rising gas prices were the result of antitrust violations by oil companies or refiners. It eventually concluded that the increases were based on supply and market conditions.

That same year, the California Energy Commission launched its own investigation, eventually finding that unplanned refinery outages, unusually high fuel exports and tanker troubles — not misdeeds by the oil industry — were the primary drivers behind a springtime price surge.

As prices soared in 2007, state attorneys general jumped into the fray. Florida's Bill McCollum said his office was looking at more than 200 complaints about price gouging at gas stations. That same year, the House approved a bill that made gasoline price gouging a federal offense.

Talk about missing the forest for the trees! Could it be nobody talks about OPEC because they don't realize we could do something about it? After all, we can't make them produce more oil. Prices are rising and most people feel helpless about changing it.

The elegant solution that can solve this problem is to strip oil of its strategic status.

The Open Fuel Standard does exactly that — cheaply, cleanly, and quickly.

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