May 24, 2012

By Jennifer Bihm

LAWT Contributing Writer

L.A. resident Carla Ramirez said though she wouldn’t like it, she would still drive if gas prices reached five bucks a gallon.

“Unfortunately it’s a hard choice for lower-income people,” she explained. “We can’t just go out and buy an expensive hybrid.”

She pays about $200 a month for gas. Jeri Wingo pays about $300, and she says that if gas goes up to $5, she would seriously consider a bus pass. L.A. resident Holiday (she only goes by “Holiday” —  kind of like “Cher,” she explains) said she would also consider public transportation.

All three ladies, like hundreds of thousands of motorists across the United States, remember a time when gas was not much more than a dollar per gallon. Filling up a tank was as easy as having a $10. Now the simple act of driving, they say, takes way more thought and planning.

“I never really had to think about it before but I definitely have to plan my trips now,” Wingo said.

It seems extremely likely that U.S. motorists may never see gas under $3 again. Now, with increased oil demands around the globe, coupled with the Organization of Petroleum Exporting Countries’(OPEC) production regulations, it seems more of a possibility that they, like Wingo and Holiday, may be in line for that bus pass soon.

Like a loaf of bread or a carton of eggs for about 20 cents, under-$3-a-gallon gas has probably entered the realm of nostalgia.

 

A brief history of gas prices

In the 1950s the average cost of gas was about 25 cents per gallon in the U.S. This was mainly due to the fact that the country functioned mainly on its own plentiful energy sources, according to historians (sources: digitalhistory.com, econlib.org, npr.org). Resources here were sufficient enough to impose restrictions on crude as well as refined oil imports.

By 1960, however, came an increase in U.S. oil demand, causing more reliance on imports as well as the formation of OPEC. Now, individual oil-producing countries fused together into one powerful entity that produced two-thirds of the world’s oil supply. Gas was still about 25 cents per gallon, but it had jumped 10 cents by 1969.

In the early 1970s, gas was at about 36 cents; however, OPEC began wielding its power against certain Western nations. Most significant was the United States, which had supported Israel in a war against Egypt. The embargo led to a $9 price hike for crude oil by 1974, and by 1979 gas prices averaged about 90 cents per gallon.

The crisis had been sort of a blessing in disguise for the 1980s since it had spurred a growing consciousness of energy conservation throughout the nation and reforms in the oil market. OPEC had less power to wield as some non-OPEC countries began supplying oil.

Gas was around $1.30 in the early 1980s (which, according to some Internet comments, was appalling to consumers at that time). However, an “oil glut” caused prices to drop back to under a dollar by 1986.

Prices rose slightly to a little over a dollar (about $1.10) by 1989 however, affected by the infamous Exxon Oil Spill in the Gulf of Alaska. In 1990 the average gas price was about $1.15. It stayed around that price and sometimes dipped lower throughout the 90s because of increased oil production around the globe coupled with low demand (mostly among developing countries).

After the terrorist attack in New York on Sept. 11, 2001 gas was about $1.50 per gallon on average, possibly due to less air travel at the time (meaning a drop in jet fuel use). In 2005, the year Hurricane Katrina hit the Gulf Coast, gas rose to a little over $2 a gallon in the U.S.

 

By 2006 the national average price was about $2.60, and here in California it reached about $3 in the spring (gas prices usually rise around May, according to Patrick DeHaan, a senior petroleum analyst who talked to L.A. Watts Times last year about gas prices.)

 

Today

In the 2000s, as countries like India and China began to thrive economically, their increasing demand for oil was added to the already high demand among more developed countries. However, OPEC, which still holds a large chunk of world oil reserves, is not producing enough to satisfy that demand, according to recent news reports. National Public Radio reporters speculate:

“We need oil now more than ever. In the past three decades, global oil demand grew 45 percent,” writes a Planet Money blogger on NPR’s website.

“During that same time, OPEC's production increased by merely 19 percent, despite the fact that two new countries (Angola and Ecuador) joined the cartel during that time. Clearly, OPEC could produce more oil if it wanted to. But it won't.

“The reason is that OPEC countries produce almost nothing but oil. Their population is growing by leaps and bounds and, because Saudis pay no income tax, the House of Saud will need more and more money to keep its citizens happy and avoid the fate of toppled leaders in Libya, Egypt and elsewhere…”

For his part, DeHaan predicted last year that gas prices would not hit the $5 mark by 2012, citing reasons like a decrease in OPEC sales (which they do not want), a more aggressive search for alternative energy sources (which oil companies do not want), and “politics.”

Adds DeHaan: “Politicians want your vote and would likely do everything they can to make sure their constituents wouldn't be overburdened. The U.S. already is shelling out nearly 5 percent of its GDP to pay its oil bill. Before $5 gas, we'd likely see ethanol tariffs on Brazilian ethanol cease to ebb the price increase. Flooding the market with ethanol would ease demand for gasoline, causing prices to fall…”

 

 

 

 

 

Category: News



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