What’s up with the price of gas?

Henry Thompson

Oil prices have ranged from $75 to $150 per barrel over the past few years due to glitches in the delivery system, refinery constraints, demand variation, and government policy. Believe it or not, the world is not running out of crude oil any time soon. Current consumption is about 25 billion barrels with proven reserves 120 times that amount. This means there is 120 years of oil even if without new reserves (they will be) and reduced consumption as the price rises (there is). With economic depletion, proven reserves would be half depleted as the price triples after a century, hardly the doomsday story typically heard from journalists and environmentalists. Potential reserves are much higher than 120 years.

The problems with the oil market are above ground. Wasteful governments own most of the oil mineral rights. There have been no new refineries built in the US for over three decades due to government regulations. Oil exploration and extraction are curtailed due to environmental laws.

Over the decades, the rising price of oil will lead to improved technology and alternatives if markets are allowed to operate. Two pieces of advice regarding the price of gas: Don’t panic. Don’t expect government policies to offer any solution.