A Price Cap for Fuel: American's Ultimate Cost

A Price Cap for Fuel: American's Ultimate Cost

With the rising global awareness of the United States, the increase in expense of crude oil has shown a chink in the nation's armor. Most analysts agree that the nation is headed for serious trouble in transportation, due to the fact that the number of vehicles on the road has increased, along with the number of barrels of oil that the U.S. consumes on a yearly basis. Though consumers are obviously directly affected by these higher prices, they are feeling the pinch indirectly as well. Diesel fuel, known as costing less than unleaded gas, can be seen as more expensive at any street corner filling station. The projections filed by the Energy Information Administration all see increases in the future, through our propane heating bills, in the stores where shipping costs increase with the diesel prices, and in our family budgets as the cost of gasoline soars with the summer months. The answer to end all of this is a governmental cap on the price of gasoline and diesel fuel, which allows consumers the safety of a guarantee against price hikes and pump gouging by individual station owners.

The indirect affect of increasing fuel costs is seen on market shelves all across the nation. This is the result of the higher cost that shippers must pay in freight charges being handed down to consumers. Just last week, diesel prices rose 5.4 cents. That brought the national average cost to $2.303. This is a full 32.0 cent increase in a full eight weeks.1 When shoppers browse the fresh produce aisle the increased price of milk, eggs, cheese and other perishables are not due to the shortage of farm animals, but are due to the recent hike in diesel fuel. The same is seen in the higher prices of all materials being shipped across the country. For instance the price of a new car is being affected, not because the car is possibly more gas efficient, but because the delivery charge has doubled. Recently at the Mid-America Trucking Show in Kentucky, the largest topic was how to deal with the issue of increased shipping expenses and how to handle the problem. Owners of trucking companies made the following comments:

"'Our fuel bill for last week alone was $145,000,' said Parnell referring to his company's diesel charges for the week of March 14, when the company's trucks logged 264,300 miles. ... A year ago, a fuel bill for traveling the same distance was about $90,000. ... 'We just can't adjust our pricing quick enough to keep up with the rising costs,' Parnell said. 'The price of shipping must go up...we have no choice.' Parnell said his company has to charge customers about $1.25 a mile to haul their freight in order to break even, compared with $1.07 a year ago."2

Though many people believe that the drop in overland freight will open a path for the reemergence of train freight, the slower transport and less extensive network close this option to suppliers and retailers. Others believe that the cost of transport will open doors to local manufacturing because larger numbers of smaller plants would allow companies to produce goods close to the population desiring them, allowing for cuts in trucking costs. These benefits of rebuilding of the individual manufacturer are long term developments, while the price of gasoline varies within days, thus companies could not recognize this need and pass up the opportunity to help communities abroad. The printed Annual Energy Outlook formulated by the Energy Information Administration forecasted that all energy products will decrease through 2010 and then increase slowly until 2025.(3, 3) This publication, though not a perfect predictor, is a reliable source for a general trend in the economic fluctuations in the United States. The expected decrease in the price of diesel fuel is a wave of relieve for the present situation, but the long term increase shows that a change is needed in current policy. A cap on the fuel prices would allow freight carriers and air freight corporations to have a guarantee that the price will not exceed a certain point, thus, they could pass this price guarantee on in their charges to marketplaces.

Americans not only drive to work but to tourist attractions as well, thus the tourism industry depends heavily on the willingness of citizens to travel.

"American drivers will consume an average 9.331 million barrels per day of gasoline this summer according to the Energy Information Administration.

...U.S. refiners' summer production of gasoline should average 8.382 million bpd, up 0.5 percent from last year.... Imports will have to make up the difference to meet demand."4

The expected increases show that summer traveling will stay stable even though consumers will be spending more at the pump. This is a reinforcing thought for those in the tourism industry, but their future fears parallel those of the freight corporations. The prospected increase in fuel costs will encourage Americans to stay home and push their budgets for pricey vacations. These future fears may seem trivial, but when a large community such as Tampa Bay, Orlando and other vacation favorites are dependent upon high annual tourism income, the fears are very real. Without being able to see the new inventions in the future, we must base our predictions on current trends which foresee a fuel price increase and possible shortage such as the 1981 high in gas costs.4 A shortage will guarantee a stop to luxury travel and force Americans off the roads, turning tourism towns like Las Vegas into a ghost towns.

The answer to these problematic situations is a cap on the fuel prices. The American economy is very strong and citizens feel comfortable spending more on the things they desire. The trend currently is to spend on gas-guzzling large vehicles to show social prestige and class in society. The recent rise in the gas prices scare consumers into saving, those who are saving do not spend on unneeded items thus, spending drops across the nation. This unnerves citizens, casing them to inspect policies and questions oil suppliers. The increase in price is said to come from many areas, one of which is the current Iraq situation, which causes fuel barrels to have a $15 'risk premium' attached to them.5 A recent release of information from the