On Friday, crude oil prices reached $109 per barrel, approaching the highs of 2011. The continued rise in the price of crude oil will cause gasoline prices to continue to rise over the next three months, because crude oil takes time to refine. But how does the price of gasoline break down? According to the U.S. Department of Energy, the national mean price of a gallon of gasoline was $3.38 in January 2012. Of this $3.38, $2.57 came from the price of crude oil, $0.20 came from the refining process, $0.20 came from distribution and marketing costs, and $0.41 came from taxes. (It is worth noting that the gasoline tax varies from state to state, and that the federal tax is currently $0.184/gallon.) Crude oil was $100 per barrel at the time.
Much of the current increase is being blamed on escalating tensions with Iran. With Iran threatening to close the Strait of Hormuz, the price continues to rise, the complete irrationality of them actually taking such a course of action notwithstanding. There is also more demand in places like India and China, which have not used as much oil in the past. Currently, U.S. oil demand is at a 15-year low, while we have an excess of supply that is being exported. One might think that low demand and increased supply would lower prices, but the United States is not a closed system. And for once, isolationism would make our problems worse. If we used a protectionist tariff to make exporting more expensive, we would just kill jobs by shutting down refineries.
President Obama's solution, of course, is more failed green energy policies. Remember when he said,
“Under my plan of a cap and trade system, electricity rates would necessarily skyrocket”?
Well, here we are. In September 2008, current U.S. Department of Energy Secretary , Steven Chu told the Wall Street Journal that
“we have to figure out how to boost the price of gasoline to the levels in Europe.”
We're not there yet, but it is coming at this rate. We are all familiar with failed endeavours like Solyndra, which for a supposedly green company, had a rather large stockpile of hazardous waste. Now Obama's response to high gas prices is to promote algae-based biofuels, a plan which Fox News' Charles Krauthammer hilariously ridiculed.
The real solution, however, is something that no politician talks about: nuclear fusion. Nuclear fusion reactors offer some major advantages over other power sources. They will use deuterium extracted from seawater as a fuel source, so there will be no “peak deuterium” in a timeframe that we have to worry about, which is not the case with oil. Fusion reactors also do not leak radiation above normal background levels, and they will produce less radioactive waste than current nuclear plants, which utilize a fission reaction. Fusion reactors are now in experimental stages at several laboratories in the U.S. and around the world.
Most experts say that nuclear fusion power is 20 to 100 years away, but we could have it much sooner if we ended all subsidies for oil companies as well as wind and solar energy, in order to give money to nuclear fusion research. Using current and future electric car technology, we can replace fossil fuels as our primary energy source. A libertarian is normally opposed to any sort of government intervention, but this could be our generation's achievement that is on par with the moon landing of the last generation. Our scientists need money to make nuclear fusion power happen, and for the sake of our energy independence, our environment, and our national security, we must give it to them.
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