Yes, it looks like we are at record highs for gas prices and those prices while rise even higher into the summer. Some are now demanding action:
"It is time for Congress and the administration to do their part to help alleviate the pain consumers are feeling at the pump," said Mark Cooper, director of research for the federation. At Wednesday's hearing, he plans to call on the federal government to provide greater oversight over oil industry market practices, create strategic refinery and product reserves, and enact policies that promote reduced oil consumption.
What, precisely, does "greater oversight over oil industry market practices" mean? I take it to mean regulation and price controls. This once again sets up a bogeyman to blame for what is a perfectly natural phenomena best explained by the rules of supply and demand you learned in high school economics. We also already have strategic reserves and the president already outlined proposals to reduce demand in his State of the Union speech.
This very same article once again points out that refinery capacity is largely to blame for the price spike:
Consumers may suspect that oil refiners are colluding in the recent price spike, but analysts say the real culprit is an unprecedented number of refinery accidents and maintenance outages this spring _ combined with drivers' rising demand for fuel. Most prominent of the outages was a February fire that shut down Valero Energy Corp.'s 170,000 barrel-per-day McKee refinery in Sunray, Texas, for months.
"If you just count incidents, there are more this year than there have been in previous years," said Mike Conner, a specialist on refinery operations at the EIA.
As a result, gasoline inventories fell by more than half, to 93.5 million barrels in the week ended May 4, from 205.1 million barrels in the same week in 2006 and 214.7 million barrels in 2005, according to government figures.
Shocking. High demand plus low supply equals higher prices. If the government wants to do something about oil prices, it seems to me there are three policies that would have a significant impact. First, the Congress could cut gasoline taxes (as opposed to Minnesota, which would be increasing gas taxes were it not for Gov. Pawlenty's veto pen). But it should be recognized that a cut in gas taxes likely means a reduction in highway money, one of Congress's favorite funds for pork dispersal. Second, Congress could ease regulations on refineries to allow them to more easily expand. But these regulations are environmental in nature and in the days of global warming frenzy, Congress is unlikely to want to appear as if they are going easy on polluters. Lastly, Congress could offer subsidies for hybrid vehicles to encourage consumers to by more fuel efficient vehicles. Many people I talk to (including myself!) are considering a hybrid for their next automobile purchase. Perhaps a little monetary incentive from the government would tip them even stronger in that direction. This is the only option that carries no political cost.
It is easy to demonize the oil companies, especially when the policies that might actually make an impact are so politically unpalatable. So create a bogeyman to distract the people from the fact that you are doing nothing.
Recent Comments