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Another summer of high gasoline prices?
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The Memorial Day weekend signifies the unofficial start of summer. Like most places, in central Pennsylvania, this means parades, backyard parties and barbecues, and interstate travel to visit family and friends. 27 million people are expected to take road trips. According to Cindy Brough of AAA Central Penn, "More than 1 million Pennsylvanians reported their intention to travel this Memorial Holiday season" and that the "number of Pennsylvania travelers represents 8.4 percent of the total population, most of whom will travel by automobile."
In recent years the most significant international event at the nexus of oil and global economics has been the American invasion of Iraq. According to the Energy Information Administration, in 2002 the price per barrel of crude oil averaged roughly $24 but rose to $32 per barrel when the U.S. invasion was launched in March of 2003. The price increase was mainly attributed to an increase in stockpiling in response to worries about supply interruptions. While the price did drop to approximately $27.1 in 2003, it increased to almost $36 in 2004 and shot up to $48 by 2005. The damage to key oil refineries on the Gulf Coast inflicted by Hurricane Katrina forced further hikes in oil prices and gasoline at the pumps, with the average price for a barrel of imported crude oil hitting an all-time high of $72 in August of 2006.
America is vulnerable to decisions made by the Organization of Petroleum Exporting Countries (OPEC). OPEC membership includes Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Algeria, Indonesia, Libya, Nigeria, Qatar, and the United Arab Emirates. OPEC’s objective is to implement unified policy decisions on petroleum policies in order to regulate oil and natural gas in global markets and, therefore, to influence prices received by petroleum producers. In recent years OPEC has held petroleum prices at 50% to 75% above market levels and, as a result, the cost of energy in the U.S. as a share of GDP has tripled since 1997. Since the oil crisis of the 1970s prices have fluctuated from 15% to 300% of competitive levels. As noted by former Fed Chairman Alan Greenspan, recessions since 1973 "have all been preceded by spikes in the price of oil."
Last summer 31.9 million Americans traveled by car throughout the summer, which represents a huge decline when compared to the 35.3 million travelers who drove in the summer of 2007. And Brough argues "We do not expect that the recent spikes in gas prices will cause travelers to change their Memorial Day plans," since travelers "are still paying almost $1.50 less for gas this holiday weekend than they did in 2008." However, today, the the average cost of gasoline in central Pennsylvania is roughly $2.30 per gallon, an increase of 25 cents since April.
When traveling on America's roads this summer, remember that the gasoline you pump into your tanks shapes and determines American foreign policy interests.Higher corporate energy costs and gasoline prices have depressed the GDP of the United States and other oil-importing countries by roughly 15% to 30%. Higher global energy prices are passed on to consumers in the form of higher food, gasoline, and home heating oil costs. It has been estimated that U.S. economic growth could be boosted by at least one percent a year if OPEC just simply allowed energy prices to be driven primarily by market forces and not by speculation and manipulation by cartel leaders.
