Prices Drop When the Supply Increases, Right?

Monday, July 29, 2013

Global oil production reached a record high in 2012, writes Gal Sitty on the blog, Refueling America. "Earlier this year, on the very same blog, the EIA released information showing that 2012 also saw record high oil prices. This may come as a shock to many people who might believe that drilling more oil will decrease prices..."

The reason it comes as a shock is that we think if there is more supply, the price should come down. In a competitive market, that is the case, but oil does not have competition. Our cars, planes, trucks, ships and planes are almost all warranted to burn no other fuel than petroleum. The market is fixed. And OPEC fixes the price. It's a monopoly.

"Breaking this monopoly can be achieved by enabling drivers to choose between fuels when filling up their gas tanks," writes Sitty. "Cars like the Chevy Volt, which can run on either electricity or gasoline, are an example of how consumer choice with regards to fuel can save drivers money. Other fuels such as ethanol and methanol can also be used to expand consumer choice, with a significantly smaller capital investment, by making slight modifications to existing vehicles to facilitate the safe and efficient use of these fuels. Lastly, unlike gasoline and diesel, which are only produced from oil, ethanol, methanol and electricity can all be produced from multiple sources, further increasing consumer choice and hence competition."

With a stroke of a pen, fuel competition can come into being nationwide. The Open Fuel Standard can do it quickly and efficiently. Please get everyone you know to help this happen. You can find all the tools you need to get started by clicking here.

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