How can we solve the gas crisis?

Answer 1

quick fix...build more refineries and drill offshore long term...find new energy source improbable fix...take over the middle east The gas "crisis" is mostly the distress of American consumers at gasoline prices suddenly being much higher than they had been before.

It may help to understand what prices are conceptually: The price of an item is what you must give up to get it in trade. That price may be mostly in money, but it can also include physical goods given up (e.g., a trade-in on a car purchase), physical effort (e.g., a free (old) piano if you'll move it out of here), time (one major cost of a college education is the four years out of your life that it takes to earn one), hassle (e.g., the boredom & the terror of having to absorb dull economics lectures well enough that you can survive the surprise quiz), even pride (e.g., if you want to keep your job, you may be forced to pretend you enjoy your boorish boss's off-color jokes).

When there isn't enough of something to go around -- such that everyone who wants some can have all they want -- then somehow the available supply must be rationed out. Price acts as this rationing device, with the largest quantities of the scarce item going to whoever will give up the most to get it, smaller quantities going to those who weren't able or willing to give up quite as much, and none left for those who weren't able or willing to give up enough to even be a contender.

Gas prices are high at the moment because there have been increases in demand -- especially China & India are growing rapidly and thus need far more energy than they did in the past. There have also been some declines in the available supply -- especially disruptions in Nigerian production, but also increased inefficiency in Venezuela.

We could ask China & India to take less of the available supply, but they hardly have any incentive to listen to us. And China & India are about 7 to 8 times the population of the United States, so that even smaller increases in their demand will still look like massive drawoffs from our perspective.

We could try to get world production of oil up, but this is expensive and slow. (Although there is some new production slated to come from Brazil.) Additional U.S. production is largely stymied by our environmental movement -- sometimes even to the detriment of the environment. (Did you know that the field under the Santa Barbara Channel is under pressure and consequently naturally seeps several multiples of the likely spillage from any drilling? And that drilling that field would reduce the pressure in it and thus reduce the seepage!) (Also, since we don't produce additional oil domestically, we get much of our supply in tankers. And tanker accidents are a far greater source of oil spills than drilling accidents! In the name of the environment, we've chosen the more spill-prone path to getting our oil!)

But I digress. And it may well be that the additional amounts we could likely produce would never keep up with the growing demand from Asia, anyway.

Substitute fuels (e.g., ethanol or biodiesel) are still quite tiny in relation to the size of the shortfalls. And I believe they are still more costly than simply drilling for more oil. (Plus they may turn out to have nasty side-effects, such as the surging inflation in food prices when too much of our corn crop gets diverted into making ethanol.)

Net, net, the likely solution is that we'll simply have to get used to the higher prices for gasoline. That's not all bad -- we'll probably learn to be more conservative about wasting the stuff. But there is no magic solution.