Now that US gasoline prices have fallen to a national average of below $1.92 per gallon as of today, the lowest price in seven years going back to early 2009, I thought it would be a good time to re-publish a CD post from about a year ago when gas prices were just above $2.00 per gallon.
John Stossel wrote this at the end of May 2013 when the price of gas in the US was about $3.65 per gallon:
Annoyed by the price of gas? Complaining that oil companies rip you off? I say, shut up. Even if gas costs $4 per gallon, we should thank Big Oil. Think what they have to do to bring us gas.
Oil must be sucked out of the ground, sometimes from war zones or deep beneath oceans. The drills now bend and dig sideways through as much as 7 miles of earth. What they discover must be pumped through billion-dollar pipelines and often put in monstrously expensive tankers to ship across the ocean.
Then it's refined into several types of gasoline, transported in trucks that cost hundreds of thousands of dollars. Finally, your local gas station must spend a fortune on safety devices to make sure we don't blow ourselves up while filling the tank. And it still costs less per ounce than the bottled water sold at gas stations.
Now that gas is below $2 per gallon, let's consider a long list of liquids besides the bottled water sold in gas stations that are more expensive than gasoline, and in some cases, a lot more expensive. The table above displays the prices of 38 beverages and other common liquid household and food products, based mostly on the retail prices I observed at a large grocery store I visited in January of last year (I'm assuming retail prices haven't changed much in the last year, although I did update the price of a gallon of milk).
At the top of the list is the cost of the liquid ink in a typical Hewlett-Packard printer cartridge. At a cost of $18 for about 15 milliliters of ink in a cartridge, that works out to more than $4,500 per gallon for the ink you use in your deskjet or inkjet printer. Some of the other more pricey liquids on the list are Nyquil, which costs more than $100 per gallon based on a cost of 84 cents per ounce, and premium vodka at a price of more than $75 per gallon when you're paying $30 for 1,500 ML. Household cleaning liquids and detergents are pretty expensive per gallon - you're likely paying more than $20 per gallon for Windex window cleaner, more than $18 per gallon for Tide laundry detergent and almost $18 per gallon for Dawn dish detergent. Your mouthwash, shampoo and hair gel will set you back anywhere between $15 and $45 per gallon. Orange juice is almost $12 per gallon and milk is almost twice as expensive as gas today at $4 per gallon. Sure, you can find some bottled water cheaper than $2 per gallon, but then consider that the price of gas includes an average of almost 50 cents per gallon in federal and state taxes, and I'll bet that you'll find almost no other liquid that you buy is cheaper than gas at today's price of $1.925 per gallon (and less than $1.50 before the average US tax per gallon of $0.48).
As Stossel commented almost three years ago when gas was almost double today's price, we should really be thanking Big Oil for the miracle of today's $2 gas. On a per gallon basis, gasoline is one of the cheapest liquids consumers buy - only some bottled water is cheaper as the list above illustrates. And think about how easy and cheap it is to capture and bottle water compared to the very complicated and expensive process requiring billions of dollars of capital equipment and infrastructure that is required to extract crude oil from miles below the ground or from deep below the world's oceans. And that's just the beginning. The crude oil then has to be transported globally to the refineries that also require billions of dollars of capital investment and infrastructure to convert and refine crude oil into the gasoline that goes into your car's gas tank. Likewise, producing and bottling all those other liquids like milk, orange juice, and mouthwash is relatively easy, simple and cheap compared to producing gasoline.
We should also thank America's risk-taking petropreneurs who spent billions of dollars and many decades trying to "crack the code" that eventually unlocked oceans of unconventional oil trapped in shale rock formations miles below the ground that had previously been inaccessible. Thanks at least in part to the revolutionary drilling technologies of hydraulic fracturing and horizontal drilling, we now have the cheapest gas in history when adjusted for increased fuel economy and higher wages.
Bottom Line: When gasoline is the cheapest liquid you buy (except maybe for some bottled water), as the list above illustrates, you know that gasoline is a real bargain at under $2, just as it would be at $4! It's something of a miracle and an amazing blessing that gasoline is so cheap, and something we should all stop and appreciate the next time we stop at the pump and fill up our cars with one of the cheapest consumer liquids on the planet, perhaps while drinking some $28 per gallon Red Bull!
Related I: See today's related CNBC article "Gas cheaper than water? Not so fast."
Related II: In today's IBD ("Don't Thank Obama For $30 Oil"), Steve Moore takes Obama to task for trying to take credit for our $2 per gallon gas in his State of the Union address:
It might have been the biggest jaw-dropping moment during the State of the Union address. "We've cut our imports of foreign oil by nearly 60%, and cut carbon pollution more than any other country on Earth," President Obama proclaimed. "Gas under two bucks a gallon ain't bad, either."
Sure, Mr. President. Take a bow for the smashing success of the domestic oil and gas industry you have tried to destroy.