:: A Choice at the Pump?  ::

If you haven't personally experienced a disastrous trip to the car repair shop, you’ve heard the horror stories from friends and family about the mechanic that took them to the cleaners. And it’s exactly those stories that run through your mind when you are standing on the other side of the counter at the car repair shop.

There’s that sinking feeling in your stomach that there’s nothing you can do. Technically, you could spend the rest of your day calling other mechanics to verify what’s wrong with your car. Maybe you can even drop $60 at another repair shop for diagnostics work. But the reality of the situation is you don’t have the money and you certainly don’t have the time. You have a boss who needs the report on the desk by 1pm, a child that needs to be picked up from baseball practice at 5pm, and a spouse who’s working late and driving a car that needed an oil change three months ago. You could rush home and go online and check the Better Business Bureau but life just doesn’t always allow the luxury of educating ourselves on every issue out there and shopping around for the best deal. So as you place the credit card down, you think, “I have to pay this price – I have no choice.”

Last week, I was getting ready to drive up to Washington and between packing and picking up clothes from the cleaners, I was running late. When I finally pulled out of the driveway, I was half an hour behind schedule and the gas gauge was on empty. So I pulled up the street and whipped into the first gas station, cringed at the prices and pulled up to the pump. “No fuel” the hand-written sign read. My heart sunk. I pulled out and drove down the street now even more aware of my pressing schedule. The next gas station I pulled into sported orange bags over all the gas nozzles indicating they too were out of gas. Finally, I drove a half mile up the street and noticed a gas station with lines of three and four cars at each pump. As I pulled up and sat in line to fill up the tank of my car with $3.00 gas, I had that sinking feeling as if I were at the car repair shop. “I have to pay this price,” I thought, “I have no choice.”

More and more as we pull up to the pump we are faced with this increasing frustration caused by the fact that we are players in a process over which we have no control and little understanding. With executives reporting record oil profits and record salary and retirement packages, as we fill up the tank, take a hard swallow, and pull away, frustration more often than not becomes anger as opposed to empowerment. However, only by coupling education with choice can we regain control over our frustrating energy crisis.

While many of us recognize that Americans pay one of the cheapest rates for a gallon of gasoline in the entire world and that we are experiencing one of the strongest economies in years – in fact the Commerce Department reported last Friday that the U.S. economy is having the strongest and healthiest growth spurt in 2½ years – we are nevertheless aggravated at the compounding problems that increased gas prices are causing.

For many of us the pinch at the pump we feel is multiplied by three or four drivers in the family – two working parents, a child in college, and a child in high school, perhaps. Suddenly a 20 cent increase per gallon can be sucking hundreds of dollars out of an already unyielding budget. And just as gas prices are squeezing families, they are placing enormous strains on our small businesses and our farmers – the backbone of our economy and our largest employers in the United States. Underlying these frustrations is the fact that we don’t have a choice in a process that is so complex that for the large part we don’t understand it.

So in the process of taking back control, we start with education. While there is no single reason why Americans are paying so much at the pump, there are plenty of factors. The U.S. Department of Energy reports that when you pay for gasoline, your money is typically paying for the following four things: crude oil, refining costs, distribution & marketing, and taxes. Crude oil inventories consistently have the most dramatic effect on gas prices. And the single largest entity impacting how much oil the world has is OPEC, a consortium of 11 nations that produce 40% of the world's oil production and hold roughly two-thirds of the world's oil reserves.

When OPEC wants to raise the price of crude oil, it can simply reduce production. This causes gasoline prices to jump because of the short supply, but also because of the possibility of future reductions. Sometimes just the threat of oil reductions can raise gas prices. Since the United States depends heavily on foreign oil supplies, the actions of OPEC have a significant effect on what Americans pay for their gasoline.

Additionally, rapid growth in oil demand from China and India is also causing gas prices to rise – and will continue to do so in the near future. Together, these two nation’s combined populations account for a third of the world’s population. In the next two decades, China's oil consumption is expected to grow at a rate of 7.5% per year and India’s 5.5%, compared to a 1% growth rate for the industrialized countries. And as China and India continue their economic expansion, these countries will continue to see securing access to oil as a strategic imperative to their growth.

Many other things also impact oil prices. Typically, the demand for gas spikes during the summer when many people go on vacation which, in turn, pushes prices up. Price increases also occur when refineries perform spring maintenance, decreasing the amount of gas refineries can produce. Varying state and local taxes cause varying prices around the country. Gas station competition can also play a part. Even the distance from which the gas station is located from the oil refinery can also affect prices because of transportation costs. Gas shortages as we’ve experienced in the eastern part of the Fourth District as a result of cleaning gas tanks to allow for more environmental-friendly gasoline also will have a short-term impact on fuel prices at the pump.

Because there is no single factor influencing how much we are paying at the pump, there is clearly no single solution. In order to have the maximum impact, solutions needs to be pursued in tandem. To do that, the United States needs a national energy plan.

Over the coming weeks and months I will be placing a special focus in my columns on gas prices – on sharing information about the complex issues that determine why fuel costs are so high, on soliciting advice and ideas about long-term solutions to America’s energy needs, and on taking deliberate calculated actions that impact America’s energy issues for the long term haul.

Next week, we will look in-depth at some of the solutions that I am supporting to improve the gas prices situation and to further a long-term energy plan that inserts choice back into our energy process. In the meantime, I hope you will take some time to read my Gas Prices Primer that answers frequently asked questions on energy costs. I also want to hear from you this week. Take a minute to email me with your frustrations, your observations, and your solutions.

Gas prices have always been volatile, and like any commodity on the world market, we can’t expect to control them completely. We can, however, work to ensure that the United States has adequate and affordable future energy choices by formulating a national energy plan that is focused on increasing choice by improving domestic production of oil, expanding fuel efficiency, and continuing to search for other viable and cost-efficient fuel sources. And in the end, by increasing choices we work towards a day when we can pull up to the pump and think, “I don’t have to pay this price. I have a choice.”