I keep hearing from friends that, "if we would just drill more, the price of gas would go down". I continue to have a problem getting them to understand the facts. This is my last try at showing why the price of gas is going to continue to go up.
Look at it this way. When we first discovered oil, the wells were very shallow and easy to drill. As time has gone on, we have had to drill deeper and deeper. We have had to move off land where it is easy to drill into water that is deeper and deeper. We have had to go farther and farther from where the oil was needed. We have also had to try to use oil that was of a lower quality that was more expensive to refine. Notice that all of these factors have been going in one direction, more difficult and more expensive. The only conclusion that can be drawn is that the price of gas will continue to go up.
One other point is the "money" that you use to buy the gas. What is happening to it? It is going down in value. It was not so long ago that our money was based on the value of gold. Back in about 1975 it took $32 to buy an ounce of gold. Now it takes $1700 to buy the same ounce. Back in 1975 a barrel of oil was worth about $5, but now it is $105. Did the cost of oil go up or did the value of our money go down? Back in 1975 with an ounce of gold, you could by 6.4 barrels of oil. Now you could buy 16.2 barrels of oil with an ounce of gold. What is going on? Did you ever see the value of our dollar go up in value? I don't think so.
How about how much oil can you buy with an hour of your work? With this one, you have to adjust for your own personal growth in earnings vs the increase in pay for doing the same job at the same age. You really need to use "starting" wages. Let's use an average carpenter. Back in 1975 a carpenter made about $10.00 per hour. Now that same job would pay about $25.00 per hour. Back in 1975 the carpenter could buy two barrels of oil per hour. Now that same carpenter could only buy 1/4 barrel.
Considering how much the price of oil has gone up, based on every measure, do you really think that more drilling will make it go down? Really! In all these cases, I showed that the bottom line is how many barrels of oil can you buy with an hour of your labor. In all cases, your labor was worth less compared to the price of oil. I am not saying that you will ever be able to earn enough to actually buy more oil per hour than you were in the past, but we can slow the rate of our decline. since it is only the value of our labor that we have any possible chance of affecting, that we should concentrate our efforts on making our labor worth more rather than just drilling. Drilling will help us earn more, but it will not affect the price of oil.
If this is hard to understand, look at farming. We are farming all the "best" land right now. Any new land that we farm will be "worse land and the food produced off that "worse" land will cost more than the food produced off our "best" land. We have dammed most of the best rivers and diverted that water to irrigation the best land. We can do more, but it will cost more and the food produced from that land will cost more. We have pumped water out of the ground to irrigate farms and at first the water table was high and cheap to pump. Now the wells need to be deeper and the water cost more to pump. Bottom line is that food gets more expensive.
Try fishing in the sea. The stock of fish in the sea has been going down for the past 100 years and it is more and more expensive to catch the fewer fish. The cost of wild fish is going up. This is just another example similar to oil. It can only go in one direction. Now do you think that the price of gas will keep going up? Think about it again.
