Gas Up Over $1 Per Gallon Since Obama Came into Office

Since January of 2009 when President Obama took office gas has increased in price by about 50% or about $1.00 per gallon. The explanation is very, very clear in the Washington Times piece about it.

"The reason that it dropped is because the U.S. sent a signal to the markets, by dropping the moratoria, that we're going to drill on our lands. Obviously, we never followed up, and thus you see the crisis gradually rising," said Rep. Doc Hastings of Washington, the ranking Republican on the Natural Resources Committee.

Of course the President ingeniously reversed President Bush's orders to allow more drilling offshore. Remember "drill, baby, drill"? Remember how Joe Biden ridiculed it? Gas is at $3 with no major crisis and a floundering economy. A major crisis coupled with a great economy (unlikely, I know) could get the price up near $5-$6 per gallon.

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How to Solve Our Dependence on Foreign Energy

Even with gas and oil prices dipping over the last six months, we have to keep in mind that unless we do something drastic this is only temporary. When the economy comes back online, expect the return of four dollar gas. Oil could again reach near $150 and a prolonged economic growth period could push gas near six dollars.

In order to attempt to reverse this potential future, the government and our business leaders need to make the decision that we should be less dependent on foreign energy. Everyone states how they'd like to do this, but it's imperative that we act boldly, especially while our enemies like Iran, Russia, and Venezuela have smarting economies.

So here's my plan. If you don't like it or feels that it doesn't go far enough, feel free to comment. If you think it's a good idea, email it to people you know to begin a chain that could end with Congressmen and Senators. It's time to act, and I think that it's about time.

What We Need to Do:

1. Relax restrictions on drilling for most domestic areas-- basically anywhere that won't really damage the environment. Make oil companies pay 25 cents on the dollar of profits from this new land opened in reinvestment, the "greening" of their facilities and automobiles, and the expansion of alternative energy.

2. Have the Congress invest $50 billion over the next 5-10 years in ethanol production in Brazil. Sugarcane in Brazil produces much more ethanol cheaper than corn, and avoids the fuel/food scenario. Have these fields owned by our government, with the ethanol being sent to the US tariff and tax free.

3. Create wind, solar, and geothermal energy on federal land, including solar panels on federal buildings. Phase out gasoline and diesel cars from federal and state vehicles, and phase in CNG, biodiesel, and ethanol cars.

4. Provide $50 billion over 10 years for the construction of ten synthetic coal-to-oil plants.

5. Eliminate most or all taxes on Compressed Natural Gas, and push for more drilling.

6. Mandate that all newly built homes and businesses be constructed with either solar panels or a small wind turbine OR have the owners pay a waiver to the federal government.

7. Allow the construction of more refineries and nuclear plants.

This plan is definitely expensive, but if carried out, could save us the amount it costs overall in just one year. This could be our ticket out of ALL energy entanglements with other countries (except Canada, Mexico, and Brazil.) Make this message count, send it to those who want to make a difference!

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Coffee Replacing Gasoline?

There's a neat little article up stating that coffee grounds could be processed into biodiesel. This invention could help reduce our dependence on fossil fuels, one cup at a time:

That's the idea behind a new study that turned used coffee grounds into biodiesel fuel. Coffee will probably never replace petroleum, but discarded cappuccino scraps might someday help reduce our impact on the environment, say the study's authors. They imagine a day when the byproducts of your latte end up in the gas tank of your car -- with hardly any waste left behind.

"It's a very simple two-step process," said Susanta Mohapatra, a chemical engineer at the University of Nevada, Reno. "We can definitely make a big impact on our environment with fuel made out of nature."

Cool.

Will Rate Cut Cause Inflation?

Of course if you took macroeconomics, the answer is yes... but there are a lot of factors at play.

1. The Fed will cut rates near 0%. This will undoubtedly increase the money supply and the liquidity of the markets. After the September 11th attacks, the Fed lowered rates to 1% and it spurred the housing boom... which led to the housing bust.

2. We're pumping in at least $700,000,000,000 into the economy. Considering our GDP is only about $11 trillion a year, this is a huge investment. This also increases the money supply and the availability of cash and credit.

3. Gas prices have dropped dramatically in the last couple of months. While this is good, all of the extra money that would have went in the gas tank is instead either being saved or being spent on consumer goods. That extra money being spent is being pumped into the economy, also increasing the money supply.

Naturally, these factors will help spur economic growth, which is also a good thing. However, when the economy begins to hum again, this excess money will still be floating around. Coupled with increased spending by a resurgent economy, this could cause severe inflation. Not to mention if gas prices again shoot to $4 a gallon. And if the economy is going well, state and the federal government may also dramatically increase spending. All of these factors could push inflation over 7% by 2011.

Yes, I took macroeconomics.

How Low Will Oil Prices Go?

The national average price of gasoline has fallen to $2.22 and the price of a barrel of oil has fallen to near $56.

Now, with the slowing global economy, will oil prices continue to fall? Some factors point to yes: 1. U.S. promises to drill more may flatten oil prices. 2. Increased ethanol production cuts down on gasoline demand. 3. If people don't have additional money because they're saving, the less they spend on gas. 4. If you're unemployed, you're not commuting to work every day.

But other factors point otherwise: 1. Obama wanting to restrict domestic oil drilling. 2. Cheaper gas prices may encourage people to travel just from the low prices. 3. Saudi Arabia has stated that it doesn't want oil to fall below $50. A drastic cut in oil production could spike prices. 4. A terrorist threat in the Middle East could cause a price spike.

So, where will oil be in six months? I'd guess around $75 with gas around $2.80.
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