Are gas prices too high?

Oct 222003
Authors: Stacey Schneider

The government issued a new multi-colored $20 bill this month.

The commercial on TV informed me of this; I have not actually

received one. Perhaps that is because I have not had a $20 bill in

my possession since graduation from high school. I am positive that

many of you are in this same penniless boat that will hopefully

hold out until graduation. How many times have you caught yourself

complaining about the price of a gallon of milk, textbooks or gas?

Unfortunately, those gas price complaints do not seem to disappear

when the poor boat reaches the graduation shore. There is a

nation-wide epidemic of gas complainers that need to be educated on

the oil industry.

First, it might be useful to know the intricacies of what you

are complaining about. The most common complaint I hear is that oil

companies are raising gas prices too high. Perhaps you should take

a moment of your life to dissect the price you are paying at a

pump. Yesterday, the price around town was about $1.59 per gallon.

Not all of that $1.59 goes directly into the pockets of the oil

companies. The price does include the actual oil; however,

marketing and distribution costs, refining costs and taxes all

collect into one large sum.

As of July of this year, the American Petroleum Institute

( estimated that gas taxes in Colorado equaled 40.4

cents per gallon. Of those 40 cents, 22 cents per gallon were due

to Colorado State taxes. Without taxes, the price of a gallon is

$1.19, which would make total taxes about 34 percent. Sales taxes

on other goods do not even come close to this amount.

Taxes remain the same, whether or not the price of gas rises or

falls. This means that as the price of gas decreases, the

percentage of taxes is going to increase. The oil price and entire

industry are based on the supply-demand concept. As the demand for

gas rises, the price is going to rise and vice versa. Unlike many

industries that are able to control their prices, the oil industry

stands by to watch others mold the gas price.

One factor that influences what we pay at the pump is the

Organization of Petroleum Exporting Countries. Currently, the

United States receives about half of the oil we use from other

countries. These countries and OPEC have the ability to reduce

supply at their discretion. When this occurs, it is a simple supply

and demand problem. Supply decreases while demand stays the same.

This pushes the price of gas higher.

How do we stop this foreign control and at the same time

stabilize gas prices? The answer is simple: reduce dependence on

foreign oil. This requires that the US government allow exploration

of our own country. There are many restricted areas that contain

this resource, however, oil companies are not permitted to drill.

One example of an untapped resource is in ANWR, the Artic National

Wildlife Refuge. Located in Alaska, ANWR is said to contain the

“best single opportunity to increase significantly domestic oil


Many people are opposed to the drilling in Alaska and fear we

will ruin all of ANWR. However, the area that would be affected

would be 19 square miles, roughly the size of Dulles Airport in

Washington, D.C. Also, new technology allows companies to protect

the drilling area. Drilling here would allow the United States to

be more independent in the oil field, which would in turn help

stabilize gas prices.

Keep this in mind next time you are lucky enough to possess a

$20 bill. You are willing to pay $1 for a 20-ounce bottle of

Aquafina on campus. This is equal to five cents per ounce, yet you

can get water for free from the fountain. At the gas pump, gas is

only 1.2 cents per ounce and you are complaining about it?

Stacey’s dad is a petroleum engineer in Denver. She is a senior

majoring in marketing and is a student ambassador for CSU. Her

column runs every Thursday.




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