Bursting the oil bubble - Making a buck off $5 gas

By now, readers of this column should know I'm from Boston. I've also lived in New York and San Francisco in recent years, but never more than a short walk or subway ride from work. So I never needed to own a car. Also, I was the 5th of 6 kids in a working-class household, so I never needed to worry about being given a car. When I got older there was a brief period when I thought I wanted a car to impress the ladies, but I wasted so much time and money in pursuit of (or for the mistake of) parking that it wasn't worth it. I did just as well with my natural charm, rugged good looks, and a cab. Then I came to Los Angeles where the car is king and everywhere is 20 minutes from everywhere else, depending on traffic. There is no subway, only the freeway, but it is far from free since it costs five bucks per gallon to get on.

I gave up public transportation when I became an Angeleno (not like I had a choice), and my love/hate relationship with my city has developed at almost the exact same pace as my love/hate relationship with my car. This isn't like the good old days when I worried mainly about the parking tickets I'd get after I arrived somewhere. This is a brave new world where any trip is preceded by a series of calculations including miles per gallon, tire pressure, traffic flow, estimated idle time, and (most importantly) whether or not I could find a suitable alternative in Santa Monica. All because of $5 gasoline. I know it’s not there yet, but it's over $4.50, the next stop is $5, and there is no end in sight. I put $10 worth of gas into my car and instead of moving, the gas gauge looks at me like I pulled the pump out prematurely and says, “is that all you’ve got?” It makes me feel inadequate and it causes me to pine for the days when ten dollars used to get me a quarter-tank. You know, way back in 2007.

When the price of oil and the price of gasoline both double over the course of about a year, my natural inclination is to wonder why. Some say it’s a classic supply-and-demand issue. They’re wrong. There hasn’t been enough of a drop in supply or a jump in demand over the last year to explain these prices. The spike can’t be blamed on the political climates in Venezuela, Nigeria, or Iran; and don’t let anyone tell you it’s the Saudis’ fault, either. The Saudis are investing almost $100 billion to increase their daily output by about 25%. Compare that to American oil companies (who spent their record profits buying back stock to boost per-share income, not investing in new sources of energy) and you’ll see that like any good drug dealer, the Saudis don’t want their favorite addict and best customer to get serious about alternative sources of energy. They’re happy to sell us more oil. At $140 per barrel, why wouldn’t they be?

The problem, as best I can tell, is Wall Street. Once again, speculation by investors looking to make a fast buck has gotten out of control and has led to some people having to spend almost 15% of their income on fuel costs. The same way investors looking to capitalize on the internet gave us the tech bubble and investors looking to capitalize on real estate gave us the housing bubble, investors looking to capitalize on energy have given us the oil bubble and the disgusting mental image that goes along with it. But unlike the tech bubble and the housing bubble, you don’t have to have money in the stock market or own a home for this one to hurt you. If you use a vehicle to get to work or use a vehicle to do your work, this bubble is taking money directly out of your pocket. And since just about everything you see, touch, or come in contact with came to you on a truck, the increased cost to fuel those trucks is passed on to you at the point of sale and (wait for it) also comes directly out of your pocket. Don’t you just love deregulation?

I still walk to work every day, but I’ve dusted off the ride-bumming skills that served me so well through high school. My car sits in its spot, waiting to be called up for active duty. I don't drive it, despite the hundreds of dollars I pay every month to own it, because no matter how much money I put in the tank, the gas gauge only moves enough to mock me.