Foreign Oil Dependence and Gas Prices

This is the billion dollar question, isn't it? Unfortunately there is no quick, simple, or straightforward answer. As American consumers, we try to simplify the issue by blaming it on OPEC, politicians, democrats, republicans, liberals, conservatives, whoever happens to be the punching bag of the day.

It would be easy for me to write this hub blaming any and all of these parties. This article isn't about blame though. I think the media, and the two parties do plenty of that for me. Instead, I'll attempt to provide suggestions on how to decrease the woes that have been caused by the incredible surge in oil prices. I don't claim to be an expert on economics, or foreign oil. But I do know enough to start attacking the problem with a proactive approach to it.

Before reading on, please take a good look at the image of the Supply and Demand Curve on Wikipedia. The simple part of the oil prices debate is the Supply and Demand Model. The demand for oil from America, and the world, is unlimited. When demand for a product goes up, the demand curve is shifted to the right, which increases the equilibrium price of the product. The equilibrium price is the point at which the supply and demand meet, and the balance of the free market will theoretically hit that. Shifting the demand curve to the right is the part that we play in the increase of gas prices.

The part that OPEC and all thie oil companies play is the "supply" curve. Currently, what they are doing is limiting the supply of oil to the world. This shifts the supply curve to the left, by decreasing quantity. When the supply curve is shifted to the left, the equilibrium point (the price) is increased. Both a high demand, and the limitation of production increase the price of oil individually. When they are added together, it brings about a "perfect storm" of sorts for oil prices. That's what you would call what's happening in America (and the world) right now.

So where does this lead us? Well, unlike domestic companies, our government can not regulate the production and the monopolization from OPEC and other foreign oil producers. Short of meaningless threats and slap-on-the-wrist options, there's not much that we can do to increase the production of oil. President Bush tried to speak to the leaders of middle eastern nations, and of course, it did no good.

So now that the boring economics lesson is over, what do we do to solve this? Well, we must decrease our dependency on foreign oil. That is the only viable option that we have left.

If we make strides toward achieving independence from the foreign oil developing countries, it will help solve the problem in two different ways. First it will decrease the global demand for oil, shifting the demand curve to the left (and decreasing the price). If the oil producing companies see that the American people are serious about decreasing our demand, they will be more willing to work with us to increase the supply and reduce the prices.

The popular theory behind achieving energy independence is drilling in ANWR. This is a quick fix that won't help us until five years down the road. Whether or not it decreases gas by $.05 or $.50, it is not a solution to the problem. We need to invest and research alternative fuel sources. We've known for years that oil is a non-renewable resource, and that one day the wells will run dry. We, as american people, just haven't had enough incentive to seriously pursue methods to change our lifestyle. I don't know about the rest of the public, but paying $4.10 a gallon is plenty incentive for me.