Can we stop high gas prices?
Gas prices are clearly hitting people in their wallets and pocketbooks. They also have to potential to stall the economy. Is there anything we can do to push prices down? N.C. State University economist Mike Walden responds.
“Well …, let me talk about four potential strategies that people talk about. One is speculation. Studies do show that speculation in the oil markets has contributed to higher gas prices. But it shows that it only contributed to the extent of about 15 percent of the increase. That is, speculation is responsible for about 15 percent of the increase in oil and gas prices. So if we could reign in speculation, that would help, but it clearly wouldn’t do the total job.
“Another strategy people talk about: reduced oil company profits. No question, oil companies make big profits, primarily because they sell a lot of oil and gas. The profits per gallon of gasoline are typically under 5 cents a gallon.
“Pump more oil. That’s what you hear. If the U.S. just pumped more oil — drilled and pumped more oil — that could reduce gas prices. We are pumping more oil. We do see that oil production in the U.S., it’s calculated, could increase by 66 percent over the next couple of decades. That translates to about 4 million barrels a day, but world usage is expected over that time period to increase by 31 million barrels per day. So pumping more oil would help, but again probably wouldn’t send oil prices and gas prices down.
“And lastly you hear people say, ‘Let’s get rid of the gas tax at the federal and state level.’ In North Carolina those taxes account for about 57 cents per gallon – (a) big part of what we spend. But where does that money go? Well, most of it goes to help repair our roads, expand roads. So, if we took that away we’d probably have more road congestion.
“So there are issues and trade-offs with all of these strategies.”
Category: Economic Perspective