Seconding the motion: “End the gas-price blame game”

“The economics of gas prices are comprehensible. It’s the politics that don’t make sense.”

That’s a quote from a recent Washington Post editorial about the rise and recent fall of gas prices, aptly titled “End the gas-price blame game.”

The editorial, published before last week’s announcement of the release from the Strategic Petroleum Reserve, summarizes an all-too-familiar scenario in the U.S. political game: When gas prices rise, politicians look to place the blame in a variety of places – oil companies, opposing political parties, Wall Street traders, Federal Reserve policies, and others.

Yet when gas prices fall, like they have recently, it’s clear that no one entity is responsible for the drop.

That’s because crude oil markets (and therefore gasoline prices) react to factors that are largely out of any one person’s control – geopolitical circumstances, Fed policy, seasonal variations, and global demand fluctuations are just some of the factors the Washington Post mentions.

The reality is that problems occur when politicians, government officials and others try to create policies that have long-term implications based on short-term market fluctuations.

For example, we’ve seen politicians try to punish oil companies for gas prices by proposed tax hikes, legislation such as “use it or lose it” and a variety of other tactics – not one of which would result in lower gas prices.

So what are the long-term energy policies that would help end the finger-pointing and instead have a positive impact?

The Washington Post doesn’t say, but here are a few that I would suggest:

  • Policies that promote safe and responsible access to U.S. energy resources: Exploring and developing new supplies of energy takes decades; the more energy we find today, the more we’ll have to help put downward pressure on prices in the future.
  • Policies that promote sound and stable regulatory and tax structures: A single oil project can cost billions of dollars before the first barrel even reaches market; punitive taxes and regulations only serve to hamper current and future investment in U.S. energy supplies.
  • Policies that promote competition and a level playing field: When energy supplies are allowed to compete in the marketplace, consumers benefit from the lowest-cost options; picking winners and losers only runs the risk of increasing prices and decreasing supplies.

If we want to “end the gas-price blame game,” we have to start taking long-term policy actions rather than short-term political reactions.


3 Comments

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  1. Michael Brown says:

    “The reality is that problems occur when politicians, government officials and others try to create policies that have long-term implications based on short-term market fluctuations.”

    Absolutely agreed, Ken. As the great free-market writer Henry Hazlitt wrote: “he art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

    This points up the need for a fairly strong re-alignment of our government to genuine market principles in its treatment of economic and fiscal matters. How many momentary and understandable spikes in pump prices resulted in the same calls for investigation into the terrible, terrible oil companies – with the same result always: no market manipulation.

    I must say, large companies must become stronger advocates for market principles in government, else there will be less and less real progress in filling the energy needs of a prosperous, innovative economy.

  2. gerald hoppe says:

    It seems there is blame for every one.but i still not under stand how drilling for more helps us. we lack refining capabilities, not to mention the fact oil is an openly traded commodity, OPEC controls price for the most part, not to mention increased demand from developing countries. so i do not see how pumping more here will lower the cost for oil. supply and demand would mean selling to the highest bidder, no matter where it is pumped. releasing the oil reserve did nothing except we will pay a whole lot more to replace it.

  3. Michael Brown says:

    “The reality is that problems occur when politicians, government officials and others try to create policies that have long-term implications based on short-term market fluctuations.”

    Absolutely agreed, Ken. As the great free-market writer Henry Hazlitt wrote: “he art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”

    This points up the need for a fairly strong re-alignment of our government to genuine market principles in its treatment of economic and fiscal matters. How many momentary and understandable spikes in pump prices resulted in the same calls for investigation into the terrible, terrible oil companies – with the same result always: no market manipulation.

    I must say, large companies must become stronger advocates for market principles in government, else there will be less and less real progress in filling the energy needs of a prosperous, innovative economy.

  4. gerald hoppe says:

    It seems there is blame for every one.but i still not under stand how drilling for more helps us. we lack refining capabilities, not to mention the fact oil is an openly traded commodity, OPEC controls price for the most part, not to mention increased demand from developing countries. so i do not see how pumping more here will lower the cost for oil. supply and demand would mean selling to the highest bidder, no matter where it is pumped. releasing the oil reserve did nothing except we will pay a whole lot more to replace it.