Wes Moss: Who controls the price of gas?

Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

Politicians are constantly promising us the moon and the stars — more jobs, higher benefits, lower taxes. Now our leaders are vowing to lessen the pain at the pump.

Every player in the political arena, including President Obama and his GOP challengers, has a plan to bring down oil prices. A vote for them means we’ll be paying less for gasoline thanks to a program of (take your pick): tax code reforms, more drilling, a new pipeline, less reliance on Middle East oil, and/or a release from the government’s Strategic Petroleum Reserve (SPR). These are all simplistic and flawed ideas.

Let’s start with the silliest “solution,” releasing oil from the SPR. The U.S. burns about 20 million barrels of oil per day. The SPR holds about 700 million barrels, or about a 35-day supply. Opening the SPR could briefly lower the price of oil by spiking supply levels, but then we’d be right back to a global marketplace with no cushion to fall back on.

More drilling? Love it. But sticking a few more drills in the ocean or Alaska won’t move the needle on global supply more than a fraction of a percent.

What about less reliance on Middle Eastern oil? Guess what – we’ve been headed that way for years, and we’ve made great progress. About 82 percent of our oil supply currently comes from North America – 55 percent from the good ol’ USA. Just about 11 percent comes from the Middle East.

Of course, given its role as a major world supplier, the Middle East is influential in setting global oil prices, and we do remain vulnerable to its whims and turmoil.

Bottom line: The price of oil is set by a law far beyond the influence of any lawmaker – the law of supply and demand of almost 7 billion people. Oil prices are rising because global demand is rising. Americans are no longer the only people driving cars, running huge farms or building miles of asphalt roads. China’s consumption has soared in recent years to more than 10 million barrels per day, and the burgeoning economies of Brazil, Russia, and India gulp up oil on a similar glide path.

So regardless of the huffing and puffing in Washington (and on the campaign trail), pumping gas is going to feel like giving blood for the foreseeable future…at least until oil becomes too expensive to bear, and we decide to use less. The price will then self-correct. In the meantime, you don’t have to sit there and be a victim. You can profit from rising oil prices by owning stock in companies that profit from those increases. Get started by exploring something like the S&P Energy Select Sector ETF.

Do you think any politician has the ability to bring down gas prices?

– By Wes Moss, for Atlanta Bargain Hunter

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9 comments Add your comment

Road Scholar

March 5th, 2012
6:48 am

Hell no! The politicians are just pandering to the uneducated masses…which Georgia has plenty of! It’s like Romney’s pledge to cut everyone’s taxes by 20 %; I guess deficits don’t matter. Because if they did more revenue is needed to reduce the deficit.

Road Scholar

March 5th, 2012
6:51 am

geraldsmithz

March 5th, 2012
7:04 am

As the price of solar and wind technology continues to drop to more affordable levels, and as energy-efficient buildings become more popular, “green” industries will grow even more rapidly in the future hence more jobs get a degree from High Speed Universities for your career

RedNeckRick

March 5th, 2012
7:23 am

Wes, this is dead on. I’d also like to point out that drilling moratoriums were in place for many years, lifted by GWB in 2008. President Obama kept most of the Bush drilling plan. regardless of the opinion of the many misinformed who listen to “entertainment” news sources. Keystone XL won’t make a noticeable impact either, as the U.S. would still have no say in who receives the oil that leaves from the Texas terminus. Will it increase the overall supply? Yes, but not in the proportions that people believe it will. Why won’t Canada use its first pipeline solution to send oil to the west coast of Canada, a much shorter route? Because it is easier to use diplomatic relations on an ally than it is to run another pipeline through the vast western section of the country, including the Canadian Rockies. The problem for the U.S. is that alternative sources of fuel haven’t been properly developed and that might be the real tragedy of keeping the auto makers afloat because it will keep the “same old same old” around instead of spurring investment and production of new technology to fill in the gap in the market.

loy

March 5th, 2012
8:28 am

In Newt Gingrich’s recent speeches he said he can bring done gas prices to $2.50 a gallon. I have know that was a lie the first moment it came out of newt mouth. And he surpose to win Georgia. The problem is the people that votes for him an WSB radio 750 which have all nuts thats making false comments day after day.

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Pam

March 5th, 2012
1:15 pm

Yes, government can do something to help…1) Deal with Iran 2) Stop debasing the dollar 3) Flood the world market with oil. It’s no secret that the current administration is anti-fossil fuel and there is the mentality that gasoline should cost the same here as it does in Europe (about $10/gal)…all with the idea of nudging us into green energy. I like the idea of green energy and I believe market forces will slowly get us there without wrecking the economy; but I don’t like the current administration who talks out of both sides of it’s mouth.

Stanley Strickland

March 5th, 2012
8:29 pm

We need energy independance which we have been talking about for 35 years! We have plenty of natural gas…let’s use it. It burns cleaner and pollutes less than gasoline. I’m hearing that the administration wants gas to be much more expensive to force conservation and the use of smaller cars. However, small cars don’t get food to the grocery store and another round of economy destroying inflation is set off.