Up, Up & Away...!

The hoopla around ever rising Gas & Oil prices has kept me on the toes since past few weeks. Looks like many of my acquaintences (including me) felt the price pinch pretty strong (God, almost all the mealtime discussions used to be centred around either Gas Prices or Microsoft-Yahoo Deal !!) - so few of us decided to demystify the phenomenon [Okay thats outright exxageration ;)] . We assigned ourselves a week and decided to get back with respective findings about the theory behind "Gas Pricing". The facts everyone came up were beyond impressive & I just can't wait more to share the consolidated findings. First some interesting Stats :

• United States continues to be the largest consumer of gasoline(petrol) in the world, we guzzle almost 2.4 Gigalitres everyday [Source EIA]
• Americans drive almost 3 trilion miles every year which works out to be around 800 trips from Sun to Pluto & back. [Source MEMA]
• Contrary to the perception, the gas prices in US are quite low when compared to those in Internation Markets.
• The variation of Gas prices across the globe is way too much. On one end of the spectrum there's Venezuela where Gas Price is a mere 12 cents a gallon (I can drive on and on and on ;)) then there's Sierra Sierra Leone where one has to shell out almost $18 per gallon (better use horses for commute)
• The Hybrid Car sales are growing exponentially in US with California being the leading state which is a feel good factor indeed. [nearly 250k Hybrids were sold in US in 2007]
• Govt of respective countries keep a very close watch on Gas Prices. Even a small hike in prices may result in cascading effect in Transportation costs, cost of almost any material good sold - thus the strong priciting control & vigil.

The Math

The Gas prices are certainly governed by the usual Supply-Demand Equation but there are a bunch of other factors that come to play a distinguished role when it comes to true pricing. I was surprised to observe the variables my friends came up with that can effect Gas prices:

• Labor Cost (This directly effects refineries & thus the price)
• Fluctuations in Stock Market & Weather
• Natural Calamities (Remember how Katrina took oil prices for a toss)
• Relationship between nations
• Change in Taxation Policy (Obama & Hilary know this pretty well too :D)
• Crude-Oil Inventories Rhythm
• Maintenance or Over-hauling of a major Petroleum Refinery
• Commute time of ships transporting crude oil from Petroleum producing nations to the others.
• Competition amongst firms distributing Petroleum Products.
• Seasonal Demand (During Summer Vacations the consumption grows by a huge amount which in turn shoots up Gas prices too)

When you pump say $35 into your SUVs / Cars, the money you paid gets dietributed to various entities across the Supply Chain. To give an idea, here's a rough breakup of who pockets the every dollar you spent on your vehicle's gasoline (considering US's national avg in 2007) :

* Crude Oil (OPEC) - 73 cents
* Federal & State Taxes - 11 cents
* Refining Costs & Profits - 10 cents
* Distribution & Marketing - 6 cents

That said - the revelation left us with even more points to ponder for the days to come:

• Since our natural Gas Reserves are dwindling at an alarming rate, we (atleast few of us) should focus on how quickly we can develop technology to use alternative fuels (Hybrids are ok but what next?)
• Gas is one (major) fraction of the spectrum of Petroleum Products - thus Energy Conservation on a daily basis seems a plausible solution - but then one has to adopt a tough stand on it or participate in initiatives on similar lines.
• Try following some suggested techniques on the web for fueling our vehicles in a smarter manner. (Quick short-term fixes)
• Use Public Transport or Car Pools where possible. (I read somewhere that socialising aka networking helps & you never know you might end up meeting your next date as well;))
• Can we really think out of the box? Its been ages since we dwelled upon "Coal-to-Oil-to-Gasoline-to-Comfort" concept. Wind-Solar-Nuclear-Wave were looked upon but we never had a promising long-lasting solution.

But like they say, its better late than never, we decided that for now we would try inculcating "Energy Conservation" habit & hope for the best. Have a look at this article by Glenn Beck - hope you get Wowed too!

Happy Driving...!