NPR.org » The Real Reason Gas Costs $4+ A Gallon

Published: April 02, 2012

In his latest column for the New York Times Magazine, Adam Davidson cites Gal Luft, an oil expert who dismisses political proposals from the left and the right to lower the price of gas. We asked him to elaborate in the following post.

When in December 2008, 60 Minutes correspondent Lesley Stahl asked Saudi Oil Minister Ali al-Naimi how much it cost Saudi Arabia to produce one barrel of oil, he didn’t blink: “Probably less than $2 to produce a barrel.”

If it costs only $2 to produce a barrel of oil, then why do we pay over $105 a barrel?

Wall Street, Big Oil, President Obama, the Fed, environmentalists, the EPA have all been accused of pinching hardworking Americans at the pump.

But there is a much more important player that gets much less attention: OPEC.

Members of the oil cartel sit on top of nearly 80 percent of the world’s conventional crude reserves. Yet they account for only a third of global oil production.

We need oil now more than ever. In the past three decades, global oil demand grew 45 percent.

During that same time, OPEC’s production increased by merely 19 percent, despite the fact that two new countries (Angola and Ecuador) joined the cartel during that time.

Clearly, OPEC could produce more oil if it wanted to. But it won’t.

The reason is that OPEC countries produce almost nothing but oil. Their population is growing by leaps and bounds, and because Saudis pay no income tax, the House of Saud will need more and more money to keep its citizens happy, and avoid the fate of toppled leaders in Libya, Egypt and elsewhere.

——————————————– End of the Article ———————-

So what happens if we produce more oil?   OPEC, simply cuts back to keep prices rising and maintaining their profits.    What does a Cartel mean?  Consider this definition:  a collusive international association of independent enterprises formed to monopolize production and distribution of a product or service, control prices, etc.

http://m.npr.org/story/149684373?url=/blogs/money/2012/04/02/149684373/the-real-reason-gas-costs-4-a-gallon

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