The Daily Caller

The Daily Caller
Consumers purchase gasoline at a gas station as a plane approaches to land at the airport in San Diego, California October 8, 2012. REUTERS/Mike Blake Consumers purchase gasoline at a gas station as a plane approaches to land at the airport in San Diego, California October 8, 2012. REUTERS/Mike Blake  

Memorial Day Travel: American Families Pay at the Pump

Photo of Ken Blackwell
Ken Blackwell
Former Ohio Secretary of State

Summer is officially upon us, and millions of American families will soon be embarking on their annual trips to the beach, the mountains, the lake, grandma’s house, or any other of the fantastic destinations our country has to offer.

The beginning of “summer driving season” is also a time when many Americans turn even greater attention to the price of gasoline. After all, traveling several hundred or more miles in a loaded up minivan can rack up an awfully large fuel bill.

But what about this year? Everyone knows that domestic oil production has been surging, and that this has created tens of thousands of jobs and improved our balance of trade. Doesn’t the Great American Oil Boom also mean that families won’t have to spend as much on the Great American Road Trip? One might be inclined to think that, but summer fuel prices tell us otherwise.

According to AAA, the average gasoline price the week leading up to Memorial Day weekend is above $3.60, just a shade below last year’s national Memorial Day average of $3.63 per gallon. Further, according to the Energy Information Administration (EIA), the average cost of gasoline this summer is projected to be right in line with that of last summer.

Add it all up, and the more than 36 million Americans who are expected to travel this Memorial Day weekend — a post-recession high — should not expect to see increased domestic oil production translate to lower gas prices at the pump.

Making matters worse, despite improvements in vehicle fuel efficiency, the EIA expects that American motorists will consume the same amount of gasoline this summer as last summer, approximately nine million barrels of oil per day. In other words, our nation’s total spending on oil — which last year totaled a near-record $870 billion and accounted for 5 percent of total GDP — is still dragging down our economy, as more spending on oil equals less spending elsewhere with no added utility.

The problem, of course, extends far beyond leisure travel. Americans can choose not to take a vacation if gas prices get too high, but they cannot afford not to go to work. Businesses cannot choose to not make deliveries or transport their passengers.

So why hasn’t more domestic production of oil led to less domestic spending on oil? The main reason for this is simple: oil is priced according to a global market, not a U.S. market. While we are producing more at home, and even recently became the second largest oil producer in the world behind Saudi Arabia, all of our oil is part of the global market, where prices are determined by global supply and demand factors. Everything from supply disruptions caused by instability to booming economic growth in China or India affect prices. Recently, the tensions between Russia and Ukraine and the renewed violence in Libya have pushed prices upward.

Does this mean that American drivers are simply out of luck and forced to pay high gasoline prices based on the global rate for oil? Yes and no. It is true that Americans will not see relief at the pump as long as global oil prices remain high, which they have despite the huge increase in U.S. oil production. However, as more drivers are finding out every day, there are growing opportunities to “opt out” of the global oil market altogether.

While America’s transportation sector currently relies on oil for 92 percent of its fuel, more vehicles powered by electricity and natural gas are available to American drivers than ever before. To date, nearly 200,000 electric vehicles and 125,000 vehicles powered by natural gas are on America’s roadways. In addition to receiving rave consumer reviews, these vehicles are the single best way to diversify the transportation sector and give American drivers the opportunity to choose a less expensive fuel instead of being forced to make $100 stops at the gas station.