Eh, I’d summarize it more as “increase supply and the price will fall, irrespective of demand”. It’s like the author fell asleep halfway through the first day of Econ 101.
With, of course, a heaping dose of “liberals hate capitalism”.
This guy is a buffoon. It is amazing how some free market proponents hate the free market when the results hit them in the pocketbook. High gas prices are based on the worldwide price of oil, which has been elevated through nervousness about Iran.
I was going to respond point by point but I have little to add to xtisme’s excellent post. Just one or two additions:
6) Trust that no oil operator wants to be the “next BP”.
No one wanted to be the last BP. Even with regulation companies tend to cut corners to save money, especially when they keep getting away with it. Except for a few more pieces of paperwork, perhaps (okay, more than a few but this stuff should be going to corporate anyhow) which regulations increase cost but are unnecessary?
- Declare hydraulic fracturing & well design to be the regulatory domain of the states, not the EPA.
And if they did this, the companies would complain that having to comply with 50 different rules increases costs. The benefit to gas companies from this would be in avoiding regulations in states where they have the influence to cripple oversight.
Aren’t #4 and #5 mutually incompatible?
I don’t see how you can simultaneously “make Uncle Sam a partner in the energy business” and “set the industry free from the government”.
This is a hint that Republicans are starting to think they will not be able to attack Obama on unemployment and the broader health of the economy and are looking around for another angle. Gas prices are going to go up for a while, they’ll be highest in the summer, and then they’ll start going down. That’s always the pattern. And they’ll be high from a historical perspective because of concerns that the situation with Iran will deteriorate. That’s not to totally dismiss everything in the OP, but most of it IS dismissable, and to the extent Obama can do anything about energy use in North America, he still can’t cut gas prices. The oil market is a global market, and promising to add some more from North America in a few years isn’t going to make a big dent now.
Ten Ways Obama Can Go Fuck Himself
- Borrow someone else’s dick (but not run up the deficit)
- Lower taxes so he can buy a dildo
- Also some lube
- Though I prefer he went lubeless
- Take contortionist lessons (NOT at a four-year college at government expense, though!)
- By shoving “government” up his ass
- Pulling troops out of Afghanistan and deploying them in his netherregion
- Using prisoners at Guantanomo to assist him
- Using needless federal employees to claim he has already done so successfully many times
- Pretending that a list of 9 ways is actually a list of 10 ways
Yes, the Republicans are beginning to sound a bit desperate. Most people remember when gas prices were even higher under Bush. They go up and they go down, and trying to make people think it is the end of the world just sounds clueless. Especially if they start going down if tensions ease. And the natural decline after summer.
I wonder why this guy didn’t suggest taking oil from the Strategic Reserve? It is not a good thing to do, but it would have a lot more impact than the other suggestions.
Because a political pundit is not going to suggest something that doesn’t sound good on paper and is actually possible. He’s not interested in ways Obama could do it, but in ways that other people think may be feasible that Obama is specifically could not do.
Honestly, if gas prices become a serious issue in this I will LOL. 250$ a year makes all the difference in the world to some people, forget whether or not you will have a job tomorrow or pay more taxes? Protest over GAS PRICES!
Even the “increase supply” part implies that supply has been dropping. However, according to the Wall Street Journal:
http://online.wsj.com/article/SB10001424052970204778604577239642537372130.html
I can’t determine where they got numbers to back up that assertion, but I didn’t look very hard.
I don’t know about supply, but the drop in demand is perfectly reasonable. Unemployed people don’t drive as much. Factories and businesses which are underutilized use less energy. Plus, the US auto fleet is getting more fuel efficient. Gasoline usage in California has been declining for years, and not only because we have so many Priuses on the road.
The “President XYZ isn’t doing enough to control gas prices” meme has gotten used a few times in the last few years. Every time it’s patiently pointed out that gas is a global commodity and the president doesn’t really have much, if any, control over the price point. Maybe this time fewer people will fall for this line of attack.
They are successfully manipulating WTI (West Texas Intermediate Crude) and U.S. Light Crude Futures below the global market price, below the Brent and Dubai crudes price, but they are not manipulating global market prices. The East coast of the United States imports their oil from Europe, Africa, and the ME at world market price. The West coast imports its oil from Alaska at world market price. The gas prices in these two markets are higher than in the Midwest because of price manipulation through paper crude oil derivatives at the NYMEX, the market reference crude and price escalator, and because of a surplus of oil in the Midwest and importing Canadian oil into the Midwest, in which the imported Canadian oil into the Midwest is $15/20 lower than the market price.
However, manipulation is likely not the culprit for rising global prices, or if it has any impact, it is de minimis. The following link has some good information as to the cause of the rise in global prices for oil. http://www.businessinsider.com/heres-the-real-reason-gasoline-prices-have-been-surging-in-the-us-2012-2
Gasoline has a very low price elasticity in the short run, this means that small changes in supply make a disproportionately large increase in price. Because of this even though the president has only a small say in how much gasoline there is, even that small say if done right can make an noticeable impact on retail prices.
Much of the price run up is due to the effect of speculators driving up prices in anticipation of conflict between Iran and Israel. Due to the magic of oil futures, anticipated price increases in the future mean that prices go up now. The upside to this is that if lower prices are anticipated for the future prices will go down now. Committing the US government to allowing use of all of America’s energy sources would mean freeing up billions of dollars in oil and another energy sources to be used over the next decade. Knowing that America was committed to pumping as much oil as it could would cause anticipation of lower prices for oil and cause lower oil prices now. Since much of the run up in the price of gas is due to speculation anticipated lower prices in the future would send speculators running for the exits, desperate to get out of oil. Because of this announcing a new policy of energy development now would drop the price much more than at almost any other time.
The number 3 point refers to a particular talking point amoung a certain brand of politician that we need to stop tax breaks for big oil. By this they mean certain types of depreciation and overseas income tax breaks which are available for American companies.
I think gas prices are at their current levels because of unregulated speculation. A similar thing happened to rice in 2008. How Fear Drove World Rice Markets Insane : The Salt : NPR
Huh? Did you even read your link? Price skyrocketed when rice producing governments changed policy. The word “speculator” doesn’t even appear.
No, the link doesn’t deal with speculation specifically, but rather how the appearance of scarcity cause panic and panic pushes the markets beyond the bounds of common sense. A similar mechanism is at work in the case of oil.
Beyond common sense or in line with reality, depending on your personal view.
Actually there is a culprit out there manipulating prices. It’s called OPEC, and seems to be pretty open about said manipulation. Not sure what the Attorney General or FBI can do about it though…
Great idea - that is until we don’t have the reserves for when the price really goes up. Then we’re really screwed. If you could arrange for this not to happen for 40 years or so, when I’ll probably be dead, I’d much appreciate it.
Opening up the spigot for short term political advantage is totally irresponsible.
Volatility has the advantage of making the argument for energy efficiency work better. I have a Prius, and I know all about the economics of buying one. However using 8 gallons of gas every 2 weeks for a reasonably long commute makes $4.10 a gallon gas go down much easier, and decreases how much I justify buying one due to psychological benefits. Better energy efficiency is the best way of screwing OPEC.
I love The Onion.
Wait, what?!
Humor expands arithmetically, weirdness expands geometrically.