From the July 2008 Idaho Observer:

Cost of gas, diesel NOT tied to presumptive cost of crude oil

By Don Harkins

As we exceed $4 for a gallon of gasoline, proving the point that gasoline (diesel, jet fuel, heating oil and asphalt as well) is actually a waste product of crude oil refinement becomes critical to understanding why gas prices are rising. Once we understand why we’re paying over $4 for a gallon of gas (and even more for diesel) then we can see how our belief that the oil companies are just greedy is about 180 degrees from the truth of this nation-killing matter.

A barrel of oil is 42 gallons. Of that, 19.5 are gasoline, 9.2 are diesel fuel and heating oil, 4.1 are jet fuel and 1.3 gallons are asphalt/road oil. We will call these products GDJH&A. An additional 8.1 gallons are coke, liquefied gases, still gases, kerosene and residual fuel oil. The products of crude oil that serve as feedstock for chemicals, pharmaceuticals, paints, solvents, lubricants, rubbers and plastics equal about 1.7 gallons of a barrel of crude.

(Note: The ratios indicated above are averages. The actual amounts of each cracked off component of crude varies with the quality of the oil. The quantities even change due to the unique properties of each component once it is separated out).

End use v. value added. When GDJH&A are "cracked off" a barrel of oil in the refinement process, they are end-use products. Whatever the per-gallon costs of GDJH&A, they are burned up (or spread out as roads). But, the chemicals, pharmaceuticals, paints, solvents, lubricants, rubber goods and plastics that come from a barrel of oil are "value added" products.

How does the retail cost of a gallon of gas or diesel compare to a gallon of patented herbicide, insect spray, sewing machine oil, house paint or the most expensive (and widely prescribed) pharmaceutical drugs?

How many $billions are made annually from sales of fuels compared to revenues generated each year from sales of the refined products of crude? Which oil companies have what ties to corporations that produce value-added products from the refined components of crude?

Now for the $64,000 question: What would happen to the markets for the myriad products derived from 1.7 gallons of a barrel of oil if the GDHJ&A total of 36.6 gallons weren’t being burned by cars, trucks, airplanes and homes and driven on as roads?

A barrel of oil is not refined to produce GDJH&A. To the contrary, those products are the "slag" or waste material. The statement, "We have to drive around for a year burning gas to make a set of tires," suddenly begins to make more sense.

Every innovation under the sun has improved dramatically over the last 100 years—with one exception. For example, a little over 100 years ago, communication was confined to oral addresses and the printed word. Today we can simultaneously communicate perfectly reproduced words and live images all over the globe in real time. Also a little over 100 years ago, travel was by foot, on horseback, via rail or by boat. Today you can take a plane from wherever you are and be almost anywhere else in the world within a few days. Yet, we are supposed to believe that the fuel efficiency of the internal combustion engine has not improved during the same time period?

Some innovators have shown that existing internal combustion engines can be modified to get up to 3,000 miles to the gallon and others have shown that gas-powered engines can be modified to run on water. Yet other factions of innovators have designed cars to run on compressed air or electricity. It is reported that in 1928, Nicola Tesla ran his car off ambient energy with no other fuel source whatsoever.

Plainly stated, we don’t need gas, diesel or jet fuel to travel; we do not need heating oil to stay warm in the winter and concrete makes better roads than asphalt.

What if we were suddenly burning gas, diesel, jet fuel and heating oil with a 1,000-percent increase in efficiency—or not using oil refinement byproducts at all? Where would 83 percent of a barrel of oil go?

Why is fuel efficiency in machines that burn gas, diesel, jet fuel and heating oil the only commonly-used technology in the world that has not improved? Why are we still (inefficiently) burning gas, diesel, jet fuel and heating oil? Why are we spreading asphalt all over the place?

Because we are still affording that set of tires.

Since coming off the gold standard in 1971 the U.S. has backed its "currency" with oil, loan capital, consumer debt, public debt, monetary inflation and real estate. Now that all those avenues have been tapped and are no longer the means by which enough "new money" can be created, we are being exploited at the pump. We are not paying $4 for a gallon of unleaded because a barrel of oil is trading for $135. We are paying that much, at the expense of the working class, to feed the phony fiat system with cash.

In essence, paying out our last few bucks to buy GDJH&A is tapping the final frontier of economic expansion in the U.S. When we run out of money to buy gasoline, our economy, metaphorically, will also be out of gas.

The U.S. imports about 1.5 million barrels of oil, or 1.245 million barrels of gas, diesel, jet fuel and heating oil (GDJH), per day. If we were not burning it in cars, trucks and homes, where would it go?

Without a consumer demand for GDJH, it would be accumulating as lakes and "Big Oil" would be forced to either store it or burn it off at its own expense to keep producing compounds used as feedstocks for value-added chemicals, pharmaceuticals, rubbers, lubricants, paints, solvents and plastics.

In 2007 Americans reportedly used 142 billion gallons of gasoline. To get an idea of the volumes involved, an acre-foot of water equals 325,851.385 gallons. If you divide the figure of 142 billion gallons of gasoline used in 2007 by the gallons in an acre-foot of water, you get the number 435,781.48 acre-feet (of gasoline). If we were not burning that gasoline in our cars, a 100-acre lake of unused gasoline that is almost 43,600 feet deep would be created each year—and that is not including diesel, heating oil, jet fuel or asphalt.

The oil companies should be paying us to burn their slag but, instead, they are charging us over $4 (do I hear $6, $8 or $10?) a gallon for gasoline and diesel to forestall the inevitable crash of our phony fiat economy.

It’s time to face it: We will end the oil age on our terms and survive or the oil age will end on "their" terms and we, as we know us, will end with it.

Aboveground oil is toxic. In its pristine state in the Earth, oil is in perfect harmony with the balances of nature: It reduces friction and absorbs heat, stabilizing planetary processes. But the moment crude is brought to the surface it becomes toxic. Every product from crude is toxic to all life forms and causes environmental imbalances. Crude is politically toxic because it has been the underlying cause of every war since WWI. Crude is socially toxic because we have become dependent upon its various components for every facet of our physical and commercial lives. Crude is economically toxic because it is the base of the credit system that has caused the entire world to live well beyond its means.

The critical importance of this shift out of the oil age cannot be overstated. There is only one way out of this doomed relationship and that is to quickly adopt alternative technologoes that derive their power from sources such as water.

By doing so, many of the value-added products from crude will become obsolete because we won’t need them any more. Others will simply be priced out of the market because it will be impossible for manufacturers to pay the costs associated with disposing of production byproducts formerly known as GDJH&A.

At that point, crude oil will no longer be needed to power the world and it can stay in the ground where it belongs as we, of necessity, develop a non-petroleum-based way of life.

Note: I welcome challenges to the line of logic expressed in this article. (DWH)

Gasoline—19.5