Where to find cheap gas

August 11, 2015

If you want a hot tip on low gas prices, I know two places where filling up your car won’t break the bank. Saudi Arabia and Venezuela have heavily subsidized national gasoline. How do the low oil prices affect these two countries?

According to CIA.gov, Venezuela is the country with the most proven oil reserves left in the world. As of 2014, they have about 298 billion barrels underground. Saudi Arabia is the second nation with 268 billion barrels. For reference, the US.. is 11th with 31 billon barrels. The phrase “proven oil reserves” means that with today’s technology we have located and are able to extract that many barrels of oil. With advances in extraction technology, these numbers and rankings could change. Overall, Saudi Arabia and Venezuela are the kings of oil.

Both of these countries buy down their oil prices to give their abundant national resource to their citizens. According to an article Jeffrey Ball wrote for The Atlantic, “The (Saudi) government sells gasoline to consumers for about 50 cents a gallon and (oil generated) electricity for as little as 1 cent a kilowatt-hour, a fraction of the lowest prices in the United States.”

In a best-case scenario the Saudis would use this inexpensive energy to manufacture energy intensive products to sell on the global market. In a worst-case scenario the Saudis would just turn their air conditioning down to 55°F and drive big cars.

A Chathamhouse study found, “Saudi Arabia’s demand for its own oil and gas is growing at around 7 percent per year. At this rate of growth, national consumption will have doubled in a decade. Just under a fifth of the oil and gas consumed in Saudi Arabia is used for feedstock and power for industry (e.g. petrochemicals, plastics and fertilizer).”

Even for a country with Saudi Arabia’s vast oil reserves, this isn’t a trajectory they can continue. If their consumption trend goes on like this they will have to import oil by 2038 to keep up with their usage. The country with the most oil in the Middle East is now investing in solar to help reduce their national energy consumption and export more of their oil.

Essentially, if you like low gas prices in the U.S. you should hope that the Saudi’s take the difficult step towards raising the oil price their citizens pay. The more the Saudis conserve, the more they could export. That process is not easy. Gasoline, like a drug, isn’t something that is easy to quit. If you have grown up not noticing the price of gas, what motivation do you have to start conserving?

Venezuela has the lowest national gas prices in the world. The Washington Post found, “Venezuela has the most oil reserves in the world, but not the most oil production. That's, in part, because the Bolivarian regime, first under Chavez and now Maduro, has scared off foreign investment and bungled its state-owned oil company so much that production has fallen 25 percent since it took power in 1999. Even worse, oil exports have fallen by half. Why? Well, a lot of Venezuela's crude stays home, where it's subsidized to the you-can't-afford-not-to-fill-up price of 1.5 U.S. cents per gallon.”

In their political structure, they need to export oil to pay for all their other socialized programs. There, 95 percent of their national exports are oil related, according to The Washington Post. When the global oil prices dropped from $100 a barrel to under $50 last year, Venezuela ran out of money. Now the country with the most oil reserves left on Earth and cheapest gasoline has to use its military to maintain order in the supermarket lines. Diminished oil income has resulted in food shortages and massive inflation.

Venezuela’s motives seemed to be similar to Saudi Arabia’s. If they make national oil cheap it will help all of its citizens live better lives. The problem seems to be that it doesn’t help their GDPs to give away oil that could be sold. Buying down gasoline prices isn’t a healthy path in these two countries. Would that be different if the U.S. subsidized the price we pay at the pumps?

Low energy prices take away the motivation to become more efficient. If you only had to pay 1 cent per kilowatt-hour would you turn your air conditioner off when you leave for the day? Nobody likes paying more and more for the energy we need to live our normal lives, but if you stray from the global pulse of energy prices you may be headed for trouble.

Is Saudi Arabia a shorter timeline of what could happen in the U.S.? As a country, we aren’t running towards renewable and sustainable energies like other nations. We don’t have the national motivation to do so, yet.

We have two general options in our oil future. We can hope, pray, and encourage countries like Saudi Arabia and Venezuela to stop using so much of their own oil and sell it to us as cheap as possible. Our other option is to use less oil and take our feet off the glass floor that is showing cracks. We use twice as much oil as the second largest oil consuming country in the world (China), according to CIA.gov. We are the most oil thirsty nation in the world, yet we only have easy, stable access to a small percentage of it.

One estimate is that we have 53.3 years of oil left on Earth at current production rates. Is this an alarmist estimate from Greenpeace or some other environmental group? No, this estimate is from the oil giant BP. The Institute of Mechanical Engineers say we only have 40 years left on this trajectory.

Close to 40 percent of the oil reserves on Earth are in Saudi Arabia and Venezuela. Only about 15 percent of the reserves are in North America, mostly in Canada. Some of the other major oil reserves are in Iran, Iraq, Kuwait, and Libya.

There is no pipeline or ally country that can guarantee a steady oil supply for the U.S. There is no bill congress can pass or trade agreement either. We are up against sources we can’t completely control and a huge population growth in the next few decades. We had 2.5 billion people on Earth in 1950. By 2050 we could have 9 billion. What will a world with over 9 billion people and no oil look like? It will look better if you have a few decades of renewables online as backup.

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Max Rohr has worked in the hydronics and solar industry for 10 years in the installation, sales and marketing sectors. Rohr is a LEED Green Associate and is RPA’s Education Committee Chairman. He can be reached at max.rohr@mac.com and @maxjrohr.com.