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The Column

Excusing America's Gas Problem

I may not have concrete proof for what I'm about to say, but I'm going to float a theory by you. Gas prices have gone up so much in the last year because we, as American consumers, are suckers.

The price per barrel of oil is at a 13-year high. A few weeks ago, that price passed $40 for the first time since Iraq invaded Kuwait when the other Bush was president. But gas, to the American consumer, is somehow about two-thirds more expensive than it was during that invasion. This is the beginning of my sucker theory.

For those of you who think microeconomics refers to paying for things with smaller bills, bear with me while I explain the economic theory behind why we're all getting, well, pumped.

The price of oil is set like the price of any other limited consumer good – the cost is determined by the price the company perceives it will cost to replace the goods they are selling. Thus, when Iraq first invaded Kuwait, the price of oil jumped because everyone was afraid of how high the price might be in the future.

This paranoia made sense – and a heck of a lot more sense than those cheapo "Bomb Sadaam" shirts everyone was wearing. (Like your mall t-shirt is going to influence our foreign policy). It made sense because Iraq, one of our enemies, invaded Kuwait, one of our allies. In 1990, Iraq and Kuwait accounted for about nine percent of America's oil supply. So if Iraq took Kuwait AND became hostile to us, the supply of oil would have been harder to come by. Afraid of that, oil companies raised the price of gas as the price of a barrel of oil went up.

But guess what happened? The price of the barrel dropped down once we sent in troops, and was cut in half once the only memory of the war was that "Proud to Be an American" song. Did the price at the pump go down? Of course not. We got used to paying as much as we were for gas, so the price simply leveled off. Are you starting to believe me about how we're suckers?

And in the past 10 years, the United States has been importing fewer and fewer barrels of oil from the Middle East. America now relies on Iraq for just 7% of our oil, and just 3% of our consumer oil. Still, if the oil companies were scared that it'd be more expensive to get oil next quarter, the prices would justifiably go up. But the oil companies are not scared. They're laughing. They're looking at us giving them all our money and laughing hysterically that we're doing it out of a blind sense of patriotism.

The price of oil should have gone up only when we first invaded Iraq. But it's gone up consistently for the last two years. Yet we're allegedly in control in Iraq now. Hell, we're in so much control, we have time to take prison pictures that could cost our president re-election (there's that silver lining).

Yet the price of oil is still rising. Because we're letting it. We hear terrorism and Middle East and oil prices rising and it all makes sense to us somehow. How? Because we're suckers.

Last year, Exxon-Mobil reported profits of over $21 billion. Iraq's estimated GNP is as low as $13 billion. In other words, Exxon-Mobil could have made this whole mess a lot simpler by acquiring Iraq.

Never mind that Vice President Cheney used to be the CEO of Haliburton, an unregulated monopoly that makes most of their money off of the rise in the cost of oil. Never mind that Saudi Arabia (our biggest supplier of oil) increased their production to help stave off the inflated prices. Never mind that the price of oil per barrel is roughly the same as it was just after Iraq invaded Kuwait in 1990, yet by the end of the summer gas prices are anticipated to have doubled since then.

It would be hard to tell a company to charge less than consumers are willing to pay. If we never paid more than a product is worth, there'd be no Burberry or WNBA. But what's happening here is not good business – it's collusion. Oil companies are simultaneously artificially inflating the cost of their product, a practice in direct violation of every anti-trust act we've got on the books.

So while America lets these oil companies get away with everything, I am curious to know if we're being paid back. Lots of commercials tell us to sacrifice for the war. My question is, how much is Exxon-Mobil sacrificing? Are they paying a large sum towards the rebuilding of Iraq? They're certainly the ones directly profiting off of it.

There's not much we can do about the prices. We can't afford a boycott, and I know too many people I dislike to start carpooling. But we can make the oil companies explain themselves.

No matter who you're voting for and why, if you'd like an explanation as to why the current prices defy basic economic theory, why not ask for one? Print out this column and mail it to:

K.P. Cohen
VP Public Affairs
5959 Las Colinas Boulevard
Irving, TX 75039

And if Exxon-Mobil doesn't answer, maybe we can try Chevron-Texaco next – they only profited $7 billion last year.

No matter what we do, gas prices will not come down; gas prices never come down. But maybe if we all voice our concern, we can prevent them from rising any more than they already have. Of course, I could be wrong about all of this. I'm just floating a theory.


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