$3.86- The national average price of gas as of March 19, 2012, according to the Energy Information Administration. This is a 45 cents increase since January.
Gas prices are becoming a big issue for the candidates running for election in 2012. With a sudden burst in prices at the pump, the conversation has turned from unemployment rate to solutions for American oil and energy.
Some say President Barrack Obama can cure our pain of rising gas prices by simply approving the pipeline in Alaska, or increasing the amount of domestic fuel produced per year. Newt Gingrich proposed that he could make gas prices $2.50 a gallon. But what do we do with all of this debate?
There truly is not much America can to over night to make the price of gas drop. The current market is determined by the supply and demand of the entire world. With the industrialization of countries like China and India, the overall demand of gas has greatly increased in the last decade.
Since 2008, America has become less and less dependent on imported oil. In 2007, we domestically produced 42% of our own gasoline according to the Consumer Energy Report. However in 2010, the U.S. produced 49% of its own gasoline as noted by the U.S. Energy Information Administration.
There has been a lot of thought that Iran is the reason our oil prices are quickly rising. While this statement is somewhat true, there are still many other factors at hand. Iran only controls 4.6% of the total amount of oil produced a day (US E.I.A.). As stated earlier, the US produces 49% of its own fuel, and 49% of imported oil comes from the Western Hemisphere (US E.I.A). We get about 12% of our oil from Canada alone. Only about 9% of the total oil in America comes from the Persian Gulf, and Saudi Arabia makes up for 6% of the 9%. This means the amount of petroleum we receive from Iran equals less than 3% of the total consumption in the United States. Iran certainly makes an impact on the world market of oil, but there are still more contributing factors.
Demand has gone up over the last few months, as the economy seems to be making a turn around. The Federal Bank also plays a role in the growing gas prices. In 2008, when the economy took a drastic downturn, the Federal Reserve released billions of dollars in order to boost the economy out of a recession. The central bank created a situation of “loose monetary policies,” says the Week’s Editorial Staff. This decision has created a larger inflation rate than normal, which has affected our price of gas. Now that people are spending money again, we are starting to see some of inflation’s effects at the pump.
Newt Gingrich stated he could get gas prices down to $2.50 a gallon, but is that actually possible? Well it could be, but at a high cost. The full effect of Gingrich’s proposal would not take effect until 2030. American Petroleum Institute projects the operation to create around 1.4 million jobs in America, and $800 billion in revenue. So what’s the down side to this plan?
For one, there would be a lot of created pollution and waste to deal with. A lot of this oil would come from the Keystone XL Pipeline. At first glance the pipeline looks like a great idea, however there are large drawbacks. The pipeline would span 2000 miles from Alberta, Canada to Texas. It would be transporting “tar sands oil.” This oil is much more dirty than the typical oil we extract. It also takes three times the energy to harvest. The total emissions would be like adding “six million new cars to U.S. roads,” reports the Friends of the Earth Campaign. A large amount of water has to be used in order to extract the oil. The water carries “harmful substances like cyanide and ammonia.” These pollutants cause a lot of environmental problems, which are no light issue.
In the long run, the pipeline could very well be a good solution to American energy issues, but the right environmental regulations need to be kept intact. We do not want another Gulf of Mexico situation to be on our hands. Gingrich’s plan skips a lot of the safety precautions in order to deliver cheap and affordable gas.
$2.50 gas is possible in a long term outcome, but at a potentially very high price to our environment.
So what now? How can America lower its gas prices?
I’ll give 5 good answers that I have found:
1) Increase the amount of domestic oil produced- This has continued to rise every year since 2008.
2) Lower the dependency on oil- America spends billions on energy development every year.
3) Incorporate the Keystone Pipeline correctly- Not short cutting safety and pollution standards.
4) Fixing the “loose money policy” of the Federal Bank- Not allowing a drastic increase in inflation.
5) Vote- In the coming election, potential presidents will promise lower gas prices. Look into what they are saying and the pro and cons of their choices.