Without changes, $9 gas is our future

James Cook’s letter of May 26 had some glaring inaccuracies. He is correct about the terms of FIFO (first in, first out) and LIFO (last in, first out) definitions, but that’s about it. Virtually all gas retailers are independent business people. As a result these independent business people can charge whatever they want. There is little if any inventory of gasoline other than that which is either in the pipeline or in tankers. Oil pumped from the ground is transferred either via pipe or ship for the refinery. Once refined it goes into transport to the dealers. This whole process takes between 30 and 60 days. There is no giant inventory of gasoline — it is constantly in motion.

Oil reserves in the ground are being depleted. These reserves are estimated and in general have little negative tax consequence at the retail level. The major oil companies for the most part only own the reserves. They pump the oil, but have sold off virtually all refinery and dealer locations and are simply brands on stations.

As an aside. There are 42 gallons of oil in a barrel. It takes roughly 2 gallons of oil to produce a gallon of gasoline. At $100 per barrel it would cost $4.76 just to produce gasoline. This doesn’t include transport, dealer costs, and state and local taxes. This equates to roughly $9 a gallon gasoline. So why are we paying $4? Because we are using up our U.S. reserves at lower costs and importing the balance. If you want to look at reality, check out Europe. German gasoline is roughly $9 a gallon.

If Mr. Cook wants to get lower prices for gasoline, get our president to issue more drilling permits — otherwise look to $9 a gallon for gasoline in the next 10 years.

Richard Francke

Bartlett