The editor’s opinion from Marketplace, Northeast Wisconsin’s business magazine. (Obligatory disclaimer: Most hyperlinks go to outside sites, and we’re not responsible for their content. And like fresh watermelon, peaches, pineapple, grapefruit, tomatoes and sweet corn, hyperlinks can go bad after a while.)

April 21, 2008

Gasoline, and gas bags

This is rich, not to mention ironic coming on the eve of Earth Day:
Congressman Steve Kagen, M.D. again urged the President to take immediate action to reduce high gas prices. Speaking at The Little Gas and Convenience Store in Green Bay, Kagen repeated his request to the President to increase gasoline supplies by suspending purchases of oil for the nation’s Strategic Petroleum Reserve (SPR).

“Mr. President, it is time to act. Record high prices for gas and diesel fuels are crippling our economy, taking our hard earned money and putting it into bank accounts of Big Oil companies and market speculators,” said Kagen. “The President must take immediate action to provide immediate relief for small businesses and ordinary people who are fighting to keep their heads above water.” ...
Evidently Rep. Kagen hasn’t gotten the talking points memo from the Democratic National Committee that nothing should be done that might encourage oil companies to find more sources of oil in this country. Democrats, after all, have blocked efforts to drill for oil off the U.S. coasts and in the Arctic National Wildlife Reserve. Democrats, as the party in thrall to the environmentalist left, also have refused to favor a method of generating electricity (to recharge your hybrid) and heat that would replace fossil fuels such as natural gas and heating oil — that is, nuclear power. Democrats also have been behind the environmental laws that have resulted in the construction of exactly zero new oil refineries in the U.S. since 1976. (Ponder that one the next time you hear of a hurricane warning for states on the Gulf of Mexico.)

Anyone who thinks Democrats are going to do anything to reduce gas prices hasn't been paying attention. Democrats, after all, are the party that believes in jacking up gas prices to levels Europeans and Japanese pay — which, according to the U.S. Department of Energy, are $8.07 a gallon in the United Kingdom, $8.26 a gallon in France, $8.44 a gallon in Germany and $9.32 a gallon in the Netherlands. (In comparison, gas prices in Japan are a bargain-like $4.96 a gallon.)

Democrats increased federal gas taxes 4.4 cents per gallon in 1993, not as much as President Bill Clinton proposed, a 26-cent increase. Neither of this year’s Democratic presidential candidates has suggested suspending the 18.4-cent-per-gallon federal gas tax this summer, as Republican John McCain has. Don’t hold your breath waiting for Hillary Clinton or Barack Obama to suggest that, and don’t hold your breath waiting for Democratic Gov. James Doyle to propose suspending the state’s 32.9-cent-per-gallon fuel tax either. Obama and Clinton both propose, and Doyle proposed, new windfall profits taxes on Big Oil (the same industry, incidentally, that had a worse return on investment than other industries in all but four years between 1987 and 2006), something that Doyle swore wouldn’t be passed on to consumers. (And if you believe that, I’d like to show you a bridge over Little Lake Butte des Morts for sale.)

Gas prices elsewhere in the world demonstrate that gas prices are a worldwide issue, due first to higher demand as economies such as China’s and India’s grow. In fact, according to the International Energy Agency, China, India, Russia and the Middle East will consume more oil this year, for the first time in history, than the U.S. Oil prices actually have increased roughly in keeping with increases in prices for other storable commodities, including food commodities. Worldwide energy prices also demonstrate that the notion of “energy independence” is a pipe dream when energy markets are worldwide markets. But people who understand anything about economics (which includes the readers of Marketplace, but apparently not Kagen) know that restricting the supply increases the price, just as increasing demand increases the price. We've also discovered, the hard way, how much energy prices contribute to the price of pretty much everything.

Suspending Strategic Petroleum Reserve purchases will do next to nothing to change gas prices, particularly when you consider that China is also purchasing oil to create its own strategic petroleum reserve of 100 million barrels by 2010. The reality is that, short of a worldwide depression beginning tomorrow, gas prices are not going to decrease. As someone who commutes to work, I certainly hope they don’t increase anymore than they already have. (If you want a really scary thought, consider this: The federal government may be making Strategic Petroleum Reserve purchases on the belief that purchases will be cheaper now than in the future.) But increasing demand coupled with stupid policy decisions of the past have put us where we are today.

Kagen needs to learn three facts about our economy: (1) Gasoline and diesel fuel are forms of energy, and
(2) energy powers this country's economy, so (3) when you reduce available energy, you hit the brakes on our economy. Kagen's party has had a lot to do with the third of those facts. It would be better for all of us, not to mention his reelection chances, if he proposed better ideas to power our economy, without costing us more money, than his Democratic brethren have.

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