time, fuel-intensive industries, such asfarming, trucking, manufacturing and theairline industry, have all seen theiroperating expenses rise – which oftentimescan be passed to consumers in the form of higher costs for goods and services. Forexample, United Continental Holdings hasalready imposed a $20 fuel surcharge onthe price of a round-trip, domestic airlineticket – which only partially covers theburden from increased fuel costs.
This isjust one example of how consumers arealready being affected – let’s take a look atwhat occurred just a few years ago whenoil prices $147 a barrel.In 2008, 10 U.S. airlines were forced toclose and more than 36,000 jobs were cutall due to high jet fuel prices.
Similarly,high diesel prices in the first half of 2008led to the failure of more than 1,900trucking companies that operated at leastfive trucks.
Since the trucking industrycould not absorb all the costs of high dieselprices, part of the expense was passedonto consumers. Yet, with consumersbuying less due to increased costs for allgoods, the trucking industry – as well asseveral other service industries andmanufacturers – saw a decreased demandfor their goods and services, multiplyingthe impact on the overall economy.The United States has recently limited itsability to thoughtfully respond to high oilprices and tight oil markets due to thefollowing domestic policies:
moratoria, drilling bans, slowedpermitting and an uncertainregulatory environment for onshoreand offshore oil and natural gasexploration and production;
policies and programs that restrictaccess to affordable domesticenergy, such as establishing Low-Carbon Fuel Standards (LCFS) andthe designation of wilderness areasand national monuments withoutappropriate public input; and
unnecessary and duplicative federaland state regulations.Fortunately for the United States, by simplyleveraging our nation’s abundant resourcesand promoting a reasonable approach tosupport the use of all sources of domesticenergy, we can abate high oil prices – whilecreating jobs, strengthening our energysecurity and paying down our deficits withincreased government revenues.
CEA Consumer-Advocate Voices Concern:
“We go to the grocery store, doctorappointments and church. That’s itanymore. [It’s] not just gas prices that areout of control either; [it’s] what starts therise in prices for everything.”-
Posted on CEA’s Facebook: March 17, 2011
The cost to produce and deliver gasoline to consumers includesthe following expenses: crude oil to refiners; refining andprocessing; distribution and marketing; retail stationexpenditures; taxes and other fees.Crude oil represents the biggest cost component and typicallymakes up between 65% and 70% of the total cost of one gallonof regular gasoline.
As such, there is a direct correlationbetween the volatility in oil prices and the volatility in gasolineprices – meaning if we want to lower gasoline prices, we need access to reliable sources of oil.
What We Pay for in a Gallon ofRegular Gasoline*
*U.S. Energy Information Administration
*Photo taken at a San Francisco gasstation on March 4, 2011.
Looking Inside a Gallon of Gas