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, refining constraints, demand variation, and arbitrary 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 per year and proven reserves 120 times that amount.  There are 120 years of oil even without new reserves (there certainly will be) and reduced consumption as the price rises.  With economic depletion, proven reserves would be half depleted as the price triples after a century, hardly a doomsday story.  Potential reserves, including fracking and deeper sea drilling, go centuries and centuries beyond 120 years. 

The problems with the oil market are above ground.  Wasteful governments own most of 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.  Investors in alternative energy sources are politically connected and pushing for subsidies and limits on burning fuels. 

Over the decades, the rising price of oil will lead to improved technology and alternatives if markets are allowed to operate.  There are two pieces of advice regarding the volatile price of gas.  First, do not panic, and second do not expect government policies to offer solutions.