Monday, June 16, 2008

The Raw Truth About Gas Prices

Writing in the Oakland Tribune, Matt Nauman, breaks down the impact that domestic oil consumption is having on gas prices in particular, and the over economy, in general.

In the article, Severin Borenstein notes the following:

The U.S. accounts for 25% of global oil demand-- three times as much as China-- but, China is catching up to the U.S. and is projected to account for 14% of global demand by 2030. This increased demand is what is driving up costs and it shows no signs of letting up.

Most revealing however is toll that expensive oil is taking on the economy. Stanford's Jim Sweeney lays it out:

"An economics rule of thumb says that every $10 increase in the price of oil takes away about one-third of 1 percent of the U.S. gross domestic product. That means, he said, that $90 increase has stripped 3 percent from the U.S. economy. Put another way: That $400 billion hit to the U.S. economy is about three times what was spent on the war in Iraq in 2007..."

All of this of course, focuses only on oil as a raw material and doesn't even begin to factor in the cost of refining oil into gasoline in California.