Yesterday, I was having a conversation with co-workers. The topic was the future of the penny as a form of currency for the United States. It was said that it cost 1.35 cents to make a penny. That means to produce one dollar's worth of pennies (2 rolls), it will cost taxpayers $1.35 to make them. Government waste?

Of course, the topic quickly turned to gas prices as the national average nears $3.00 a gallon. I just read that with Israel waging military actions in Gaza as well as Lebanon, oil futures are now a record $75.88 per barrel. This will definitely make the national average over $3.00 a gallon.

Who did my co-workers blame for the gas prices? The auto industry? OPEC? Venezuela? No, they laid the blame at the feet of President Bush saying that he's reaping the benefits of being a Texas oilman. While I am sure that he is making some money from his oil interests, I doubt he has the power as an oilman to control gas prices by much, if at all. As President, he's doing what he can by pushing for measures that allow oil companies to look for oil elsewhere thereby decreasing our dependence on foreign oil and their power on our gas prices.

Personally, I see free markets overlapping being the culprit of gas prices being where they are.

First, oil is a limited resource. If demand is higher than supply, prices go up. Demand is high in the United States because our economy depends heavily on transportation.
Second,Add in to that the push for sales from the auto industry (is there any family besides mine that just has one car?) and you have too much demand from a limited supply.
Finally, if supply is decreased for whatever reason (war, hurricane damage, etc) and demand doesn't decrease as well, prices go up.

How do we fix the problem? If we rely on Congress to fix the problem, they have three options:

1. Increase the supply of oil by opening new areas to drill for oil.
2. Decrease the demand for oil by imposing a limit for fuel consumption (i.e. rationing).
3. Decrease the price of a gallon of gas by $0.184 by removing the federal gas tax.

There could be a fourth option, limiting the number of vehicles a family can own, but that would be counterproductive at this late stage of the game.

So we analyze the 3 options above:

We'll start with #3: the gas tax is supposed to pay for road improvements and the like. Besides it's a source of revenue for the government so forget their doing away with it.

Option #2: The reasoning for not doing this is somewhat the same as #3; limit the number of sales of gallons of gas, limit the dollars of revenue generated by the gas tax. It won't happen unless supply from foreign oil is cut off (like in wartime).

So that leaves option 1: find new sources of oil to increase supply.

Of course you know that eventually all of the oil in the world will be gone. It's not a replenishing resource.

The Colbert Report says the way to fix the problem is to use up all the oil in the world as quickly as possible so that future generations will not have to deal with an oil crisis.

Makes sense (cents?).

Brian