The high cost of gasoline has predictably become an issue in the Presidential campaign. Equally predictable has been the practice of misrepresenting that issue to the American public. The problem of high gasoline prices has been associated by both campaigns with the level of domestic petroleum production. One side maintains that gasoline prices are too high because the government discourages domestic petroleum production. The other side, seeming to acknowledge the premise of the first side’s argument, points out that domestic petroleum production has increased substantially over the last four years.
There may be good reasons to increase domestic petroleum production. Higher oil production would boost employment and improve the balance of trade. There may also be reasons not to increase production: environmental degradation and depreciation of strategic reserves. But most experts agree that whatever the benefits, increasing U.S. domestic oil production will have little influence on the price of gasoline. Petroleum is an international commodity easily transported across borders. U.S. petroleum reserves and potential production are simply too small to influence the global price of oil, particularly in a market largely controlled by a single cartel.
We are not, however, without weapons in the battle against high gasoline prices. But the best weapon we have is not increasing domestic petroleum production. The best weapon we have is giving American consumers a viable alternative to gasoline. Today, 99% of all vehicles in the United States run on petroleum-based fuels. It is no wonder that petroleum producers can price their product at fantastic margins, often a significant multiple of production costs.
Much has been made of the inability of electric vehicles to compete on price with gasoline powered cars. That criticism is for the moment well-founded. But one of the ironic benefits of electric vehicles may be their ability to lower the price of gasoline. By providing consumers with a viable alternative to petroleum-based fuels, electric vehicles would limit the ability of oil companies to set their profit margins largely at will. Destroying the monopoly pricing power of petroleum as a transportation fuel would save American taxpayers billions of dollars a year. If the Presidential candidates want to tell the American people how really to reduce gasoline prices, they should start talking about vehicle electrification.
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