There is more to the price of oil than meets the eye
I filled up my car the other day and the bill was a little over $50. That got my attention, as it always does. But then I walked into the store at the gas station and bought a bottle of Coke.
The price was $3.79.
I stood there for a minute and thought, “Something doesn’t seem right here.”
Think about what it takes to put gasoline into your automobile. Before there is a gallon of gasoline, somebody has to find the oil. Land has to be leased, geologists and drilling crews have to do their work, and an expensive drilling rig has to be brought in.
The drill may find oil — or it may find nothing at all. A dry hole is a very expensive hole.
If oil is found, it has to be pumped from the ground, gathered and transported, often by pipeline or truck, to a refinery. At the refinery, it is processed into gasoline, diesel fuel, jet fuel, asphalt and a long list of other petroleum products.
The finished gasoline then has to be transported again, delivered by tanker truck to a service station, stored in underground tanks and finally pumped into your automobile.
That is quite a journey for a gallon of gasoline.
And yet we have become accustomed to thinking of gasoline as one of the great villains of the family budget. I understand why. When you pull up to the pump and watch $50, $60 or more disappear from your bank account, it hurts.
But then I look at that $3.79 bottle of Coke sitting in my hand.
That Coke didn’t have to be discovered thousands of feet beneath the earth. Nobody had to drill a well to find it. It didn’t have to be pumped, refined, transported through a pipeline, hauled by tanker truck and stored in an underground tank before I could drink it.
It got me thinking about the price of things — and about how little we sometimes think about what goes into producing the things we buy every day.
A neighbor recently sent me the following piece. I don’t know who originally wrote it, and there was no byline attached to it. It appears to have circulated on the internet for quite some time.
Some of the prices in it are obviously dated, so I wouldn’t necessarily take every figure as current. But the comparison it makes is interesting.
It asks us to look at the price of a gallon of gasoline alongside the price of many other ordinary things we buy.
So, with that introduction, here is the anonymous piece exactly as it was sent to me:
I keep hearing people complain that gasoline is over $4.00 a gallon.
And yes, I’d love to see it at $2.00 again. But before we declare gasoline the most outrageously expensive liquid on Earth, let’s put things in perspective.
For $4.00, I get a GALLON of gasoline. I pour it into a 4,000-pound machine, turn a key, and that gallon will haul me, my wife, the groceries, the golf clubs and half the junk in my trunk almost 30 miles down the highway.
That’s actually a pretty impressive day’s work for $4.00.
Now let’s compare.
A restaurant sells me a 5-ounce glass of wine for $9. That’s about $230 a gallon. And how far does it transport me?
Usually from the dinner table to the men’s room.
A fancy coffee shop can charge $6 for a 16-ounce latte. That’s $48 a gallon. It doesn’t transport me 30 miles. It transports me from “Leave me alone” to “Okay, now you may speak.”
Bottled water at a convenience store might be $2.50 for 20 ounces. That’s $16 a gallon, for something that occasionally falls out of the sky FOR FREE.
A 12-ounce energy drink at $3.50 works out to more than $37 a gallon. Apparently caffeine becomes a precious mineral once you put lightning bolts on the can.
Buy one of those little 2-ounce bottles of “energy shot” for $3. That’s $192 a gallon. At that price, it shouldn’t give me energy. It should mow my lawn.
Maple syrup at $8 for a 12-ounce bottle? About $85 a gallon. And its principal technological achievement is making pancakes sticky.
Vanilla extract at $6 for two ounces? That’s $384 a gallon. For $384, I expect the vanilla bean to come to my house and bake the cookies.
Printer ink can cost thousands of dollars per gallon. And unlike gasoline, it sometimes refuses to come out because the printer has decided cyan is low.
Even that $9 glass of wine deserves another look. At roughly $230 a gallon, filling a typical 15-gallon gas tank with restaurant wine would cost about $3,450.
Of course, after drinking 15 gallons of wine, transportation would no longer be your biggest concern.
So yes, $4.00 gasoline is expensive.
But it’s also a remarkable bargain when you think about what you’re buying. You’re purchasing enough concentrated energy to push several thousand pounds of steel, glass, groceries and humanity nearly 30 miles.
Meanwhile, we’ll cheerfully pay $6 for coffee, $9 for wine and $3 for water, then stand at the gas pump staring at the numbers like we’re watching the national debt clock.
Maybe gasoline doesn’t need better pricing. Maybe it just needs a fancier name, e.g. “Handcrafted Premium Petroleum, locally pumped, small batch refined, with subtle notes of octane and dinosaur.”