Energy.

Energy is something that has been a problem for this country for the past couple years. We have been plagued by higher energy prices as oil has nearly tripled. Thankfully, oil has retreated to reasonable levels as-of-late, and continues its downward trend. As of today near market close, oil looks to be at just over $91 per barrel.

What people are finally realizing is that higher energy prices means higher prices for everything across the board. We have a wonderful infrastructure of the best roads in the world, but those roads are also responsible for the majority of our goods and services. As diesel fuel climbed much higher than gasoline, people saw how much more expensive food became. Congress continues to push for alternative energy, but their efforts are misdirected.

During this time, talks of ethanol and biodiesel came into the spotlight. Let's examine ethanol first. Corn- and soy-based ethanol are wonderful inventions-- IF you drive car that requires premium fuel. Ethanol has a higher octane rating than premium fuel, meaning your luxury sedan or high horsepower muscle car will run wonderfully on the fuel. However, gallon-for-gallon, ethanol actually has a lower energy content than gasoline, meaning your mileage will drop noticeably while using it. This creates a very noticeable break-even point in your personal driving when comparing the two. Near my house, E85 runs approxamately $3.29, while regular gasoline nearer $3.79. Using the 18-gallon tank on my wife's car (my vehicle is a Diesel), the average tank mileage is 400-425 miles. When you compare that to ethanol, the mileage drops to about 350-360 miles. By dividing the number of dollars per gallon by the car's average mileage, you get a cost per mile ratio. With the cheaper E85, the cost is about 16.5 cents per mile in fuel charges. With the more expensive regular, the cost is 15.8 cents per mile.

Bottom line: unless you're driving in a high-end or high-horsepower car requiring premium, pass on the E85.

While there is not too much difference, over the national average of 15,000 miles in a year, that adds up to just over $100 in additional fuel costs per year. This might not seem like much, but when you're taking it up the tailpipe for gas prices anyway, you may as well save some money. Also consider that ethanol is heavily subsidized to keep prices competitive, and the more food sources devoted to ethanol, the higher the cost of food.

Now, let's address biodiesel. Biodiesel is a wonderful invention, and it leaves you hungry as you drive (used cooking oil-based biodiesel smells like french fries!). However, biodiesel is highly caustic and can cause rubber connections on older diesels to turn to mush. If you're lucky, you'll get by with a new fuel filter. If you're not so lucky, it's a new injection pump, injectors, and a full fuel system cleaning. If that's greek to you, think of it this way: it would cost several thousand dollars to get that brand-new bluetec diesel back to working order. Not to mention, I am unaware of any automobile manufacturer that approves anything above 20% biodiesel (B20) for use in their vehicles for this exact reason. That slightly cheaper diesel just got a LOT more expensive.

You may be asking yourself "how can I save gas?" A certain presidential cantidate has talked about inflating your tires and tuning up your vehicle as a means to save more gas than we could recover from additional drilling. While I hold my snickers out of respect, I point you toward this article written by CNN before his remarks: link.

Finally, what about the argument that "Big Oil" be taxed on their "windfall" profits? Basic economics teaches us that supply and demand determines profits. Any time you tax an item, the final consumer price of that item will rise proportionally. Do you think that oil companies are just going to "give up" their profits? No chance. They will raise their prices accordingly to cover the new taxes. As a result, you and I are going to pay more at the pump.

Here's a simple example: You run a company that makes 100,000 stuffed bears a year, which you sell for $5.00. Your operating costs are $400,000 a year, which leaves you with $100,000 profit, or $1.00 per bear. Congress decides you're making too much profit on your bears, and taxes you an additional $100,000 per year. If you maintain your prices, you will not make a profit. You can't lower your prices, and you don't want to shut your doors. Your only choice is to raise prices.

Next year, your customers pay $6.00 per bear. Your operating costs are still $400,000 per year, but you now add on the $100,000 per year "windfall profits" tax. Your total income is $600,000, which leaves you with the original $100,000 profit. Congress is again stumped at your profit level, and they tax you again, and the cycle repeats.

Only the consumer is affected by the price.

Something to think about the next time you blame "Big Oil" for your energy woes.
-Craig