Oil Prices
President Bush is going to do something about high gas prices. Of course, there’s nothing that he really can do, but he’s going to do it anyway, or at least pretend to.
The Democrats are hoping that this signals Bush’s political weakness. Maybe it’s just pollster-driven political nervousness in an election year. I think that Bush is treating his base like the economic illiterates that they showed themselves to be in the Dubai Ports World fiasco. Maybe all of the above.
The non-political side of this is very simple: Oil is more expensive because more people want to buy it. The Indians and Chinese want to buy more oil than ever before, and they’re willing to pay extra to get it. If you think that the price of gas is too high, then don’t buy it. Somebody on the other side of the world will be happy to buy it instead.
You could even take pride in the fact that by paying high prices for gas you’re ensuring that the Chinese are paying high prices, too, which should slow their economic expansion. Or you could just accept that the law of supply and the law of demand are as unavoidable as the law of gravity.
In case you aren’t sure why the current demonization of the oil companies is pure flatulence, Cox and Forkum explain it perfectly. (Sorry if the image clips the sidebar. CSS and HTML remain largely mysterious to me.)
Update. Conservative pundits are uniformly on the right side of high gas prices:
Ann Coulter savages the Democrats for pretending to be upset about high gas prices, when they’ve always wanted to increase taxes on gasoline for the express purpose of pressuring Americans to use less of it. Her closing sentence:
The Democrats’ only objection to current gas prices is that the federal government’s cut is a mere 18.4 cents a gallon. States like New York get another 44 cents per gallon in taxes. The Democratic brain processes the fact that “big oil companies” get nearly 9 cents a gallon and thinks: WE SHOULD HAVE ALL THAT MONEY!
Meanwhile, Bob Tyrell takes the Republicans to task for acting like Democrats and pretending not to understand that neither the US government nor the oil companies can control the worldwide price of oil. His best paragraph:
The politicians may think the answer is to drag businessmen into investigations, but that is not going to produce oil. It may produce votes for the politicians from the electorate’s economically illiterate but not much else. What is needed is more oil or at least a steady contribution to Boone Pickens’ 85 million barrels. That means opening up areas where we know oil exists, for instance, the Arctic National Wildlife Refuge. It means encouraging the creation of more refineries. We have not built a new refinery in the United States in 30 years. It means encouraging alternative energy sources, the best being nuclear.
The point about not building new refineries may not be as strong as it sounds. It omits the fact that existing refineries have been steadily expanding their refining capacity during that same time period. So maybe the lack of new refineries is simply an economic decision that expansion is cheaper than new construction, or maybe it’s an economic decision partially driven by environmental regulations.
More important than the number of refineries is whether and to what extent our refining capacity has risen during those years—and even that’s something of a muddle: Refining capacity has increased, but not as quickly as our demand for gasoline.
And you could even step back and ask why it’s important that we refine our gasoline domestically. The argument would be: We import lots of other products that are manufactured abroad; why not gasoline? I don’t have any answers today; just questions.
But the good news is that the conservative thinkers and media are all on the correct side of the issue du jour, even if the Republicans aren’t.
Update: Power Line slams the Republicans for unveiling a “Gas Price Relief and Rebate Act of 2006″, which includes authorization for the Federal Trade Commission to “bring enforcement actions against any supplier unlawfully inflating the price of gas.” Nobody knows what it means to unlawfully inflate the price of gas, so this is silly at best, if the FTC just shuffles some paper and does essentially nothing, and destructive at worst, if the FTC takes its witch-hunt directive seriously. John Hinderaker concludes:
There was a time when Republicans knew better than to engage in this kind of stupid degagoguery. If Republicans don’t know any more about economics than Democrats, why, exactly, should we keep voting for them?
Well, there is national defense. But, still.
