In today’s Joplin Globe (5/8/11) guest columnist Don Ray voices complaints about gasoline prices that is sure to resonate with readers. The price per gallon is almost $4 and there are no projections in sight for anything less than about $3.50 anytime this year. It is causing not only pain at the pump for consumers, but raising the transportation costs of everything from food to airfare.
Seeking a solution, Mr. Ray wrote to the president and was disappointed but not surprised to receive a “canned” letter in reply. Having no button on the Oval Office desk for decreasing gas prices, the president suggests a comprehensive plan to embrace green technologies while at the same time setting standards for increasing vehicle fuel efficiency. This was unsatisfying to Mr. Ray who accuses “this green loving president”
of wanting “. . . to cripple the power generating capabilities of this country by making it impossible to produce the power we need at a cost we can afford . . . ”
Instead of the president’s approach, Mr. Ray suggests
“. . . putting a moratorium on what the EPA is doing in various areas . . . ” and restricting “. . . trading and speculation on oil to only legitimate companies . . . ,not hedge funds . . . “
He would also send the Justice Department after “speculators” and increase domestic oil drilling and refinery production. Oh, and he would also bring back the double-nickel speed limits. And finally, he recommends eliminating federal subsidies for big oil. That’s one I agree with, although I’m not sure how it helps the price at the pump – it could even increase it.
I believe there are two ways to look at this, the long-term way and the short-term way.
For the short-term way, I submit that there is no good solution. There really is no way to “outlaw” price speculation and still have free markets. President Nixon famously tried price controls for gasoline in 1973-74 with disastrous results:
“The American Automobile Association reported that in the last week of February 1974, 20% of American gasoline stations had no fuel at all.”
As for putting a moratorium on EPA activities, what that sounds like is ignoring the health effects of pollutants on air quality and inviting more oil spills like last year’s in the Gulf, the effects of which will be with us for a long time. Meanwhile, health problems like asthma are accelerating and are likely linked to environmental contaminants. No, “drill, baby drill” might lower the cost a few cents a gallon but it’s not going to solve the long-term problem.
The long-term problem of course is that we import more than half of our oil, and because of that, expose ourselves to extortion by OPEC. (And many of those dollars get spent on terrorism – that’s where Osama bin Laden got his.) We could start switching to natural gas, abundant supplies of which have recently become recoverable through the process of “fracking” (high-pressure hydraulic treatment of horizontal drill channels), but that has been shown to often cause contamination of the water table. Mr. Ray might be in favor of having the EPA ignore that, but count me as firmly against it. Clean water is essential to life as we know it and it is getting more scarce every year as national aquifers drop.
No, the long-term solution to weaning ourselves off foreign dependence is to man-up to the problem: start using less oil, drive smaller vehicles, embrace alternate (yes, green) energy sources, and continue to protect the environment. Hmm. That sounds a lot like the president’s plan to me. Fancy that.
These wild swings of gasoline prices are a big problem. People eventually adjust, but the change is painful – the variability might be more of a problem than the actual price it seems to me. Price swings are hard on the economy and they hurt everybody who drives or shops. I have often wondered if it wouldn’t be smart to levy an additional federal tax on gasoline, a variable tax that would keep the price of gasoline at the pumps at about the same level all the time. Such a tax would rise when the price of oil on global markets falls, and it would diminish when oil went up.
I would like to hear from economists about whether such a variable tax might work, because I am a great fan of the hidden hand of the market. Prices do more for real economic action than all the lip-flapping and industry-regulation in the world. (Think CAFE standards for vehicle manufacturers.)
Finally, Mr. Ray criticizes the president for using SUV’s for his travels. Sorry but that sounds niggling. While I agree that symbolism is important, surely security concerns for top officials really ought to take precedence. I hope Mr. Ray might reconsider on this point. Who knows, eventually the president might be a Republican again. Do you know any Republicans who would deign to tour in a column of Ford Focuses? (Foci?)