EnergyFactor By ExxonMobil | Pespectives has a new home

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.

  • Worth a deeper look...