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“Caught between Iraq and a Hard Place”
America’s Addiction to Gas 

It seems clichéd writing a paper on the price of gas.  Frankly, I’m getting tired of hearing people whine about it.  To me it seemed like the product of SUV loving westerners getting their “cummuppins” for a blatant disregard of the mass consumption and overuse of a limited resource.  The market isn’t however, as I imagined it to be, related to supply and demand.  Rather, the supply of the market is related to the volatility of the countries that control it.

 

There has always been a supply and there has always been a demand.  The cost of transporting oil and refining it has also gone virtually unchanged.  What has changed is the social and political atmosphere, and it has changed quite drastically.  Referring to the graph in fig. 1 the first thing to note is that gas prices climbed first in the late 1940s.  This small, but notable, increase in fuel is attributed to Israel, in 1948 becoming a recognized state.  The price of gas and crude oil literally doubled in the 2 year period leading up to 1948.  Prices continued to climb fairly regularly until 1973 during the Arab oil embargo.  High prices from 1980-1985 can be attributed to the Iraq Iran war.  Prices also fluctuated during such world events as the “Gulf War” and “9-11."

 

When trying to understand why recent events seem to have affected the prices more we have to look to the market shares of various oil producers worldwide.  In fig. 2 we can note that production shares in the US are in decline, while our dependency grows in the Middle East.

 

As conflict in the Middle East grows, we can only expect the cost at the pumps to increase.  When the countries who are the source of fuel cut off the supply in times of conflict, the only solution is to become self sufficient in our own production.  In our century, gasoline drives the war machine.  It is only natural, that in a time of war a nation would cut off the supply of its enemy.  So what happens if we are brought to that place again?  In 1973 the OPEC made a decision not to ship oil to countries who had aided Israel in conflict.

 

Another serious problem is that more than 85% of the production share of crude oil is controlled by Arab states.  I have nothing against Arab states.  However, the invasion of Afghanistan and Iraq is largely viewed as a war against Arab and Muslim people.  It is a conundrum then that the United States is biting both the hand that feeds them and the hand that slapped them across the face in September of 2001.

 

The Gas market is directly proportional to crude oil.  The crude oil is proportionate to conflict within Arab states that control the market.  So we see a blending of geographical relationships.  The laws of supply and demand are why the price is driven higher when supply is cut off and supply is cut off because of religious and cultural differences.  Albeit they can be considered political differences, but the Arab world is not a political entity, it is a religious one. 

 

There are also indications that models of spatial interaction apply.  Take for example “Intervening Opportunity;” when it comes to intervening opportunities for fossil fuels, there simply aren’t any.  Tankers return to the Middle East empty and the US alternative to Arab fossil fuel is simply not voluminous enough to be reasonable.  Also, the friction of distance becomes greater in times of war because water ways can become more treacherous.  It is not noted on the charts, but during World War Two, transporting fuel was extremely dangerous.  Therefore, the cost of such dangerous transportation was greater.

 

So many different tings can apply to this crisis; diffusion, spatial interaction, religious and political boundaries and even the decay of distance.  One thing is for certain though.  The only term that can stop this crisis is “Self Sufficiency.”  It will become more and more important in the future as our neighbor makes more enemies in the Middle East, to develop our own sources of fossil fuels.  Most important though will be alternative energies, such as cold fusion. (I guess I’m a dreamer)

Figure 1

Figure 2

 

Sources Cited

 

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