Tag Archives: gas prices

Dogs, Ponies, & Gas Prices

All week this week, the federal government has focused on gas prices and oil industry subsidies in lieu of the summer driving season beginning this month. The House of Representatives has given themselves a stage for some ground thumping:

  • The House Oversight Committee is holding a hearing today entitled “Making the Gulf Coast Whole Again: Assessing the Recovery Efforts of BP and the Obama Administration After the Oil Spill.” Quite a mouth-full title to disguise an ear-full of saber rattling amounting to pretty much nothing.
  • Also today, the House Natural Resources Committee will demand the Obama Administration quicken the approval of air permits needed for Arctic drilling in Alaska. Never mind the fact that even with the approval of new permits, it takes at least a few years to get all the extraction equipment setup and ready for production… also amounting to very little for gas prices now.
  • The Energy Department is holding hearings on different natural gas extraction methods for on-ground sites. Not sure what this will accomplish either other than act as a soapbox for politicians.
Not to mention a whole slew of other pointless hearings that will serve nothing and no one:
  • Congressional Natural Gas Caucus Co-Chairmen Tim Murphy (R-Pa.) and Dan Boren (D-Okla.) held an event on Wednesday on the role of states in regulating natural-gas drilling.
  • The Energy and Commerce Committee held a hearing on Tuesday on electric grid reliability.
  • The Transportation Committee held a hearing on Wednesday on the Environmental Protection Agency’s nutrients policies.
  • The Natural Resources Committee will hold a second hearing aimed at “identifying roadblocks to wind and solar energy on public lands and waters.”
  • The Science Committee examined “harmful algal blooms” on Wednesday.
  • The Natural Resources Committee will hold a hearing Friday on legislation to ensure the country has a domestic supply of key minerals.
  • The Energy and Commerce Committee will take a closer look Friday at the administration’s regulatory review plans.
But, at the end of the week, at least we’ll have heard our elected officials make grandiose claims, some of which aren’t even true; claims that they will use in reelection campaigns to bolster their preferred stance on energy policy. So please do not be fooled by the dog and pony show on exposé in Washington. Do, however, understand that there is little Congress or the President can do to effect oil prices. As Lon Anderson said to Capital News Connection, “Really, there is very little that Congress can do. The price of fuel is really driven on the world market.” And remember, like I’ve pointed out before, speculators are not to blame either.

Obama’s Energy Solution: More Government

President Obama took his weekly radio address to speak towards the growing gas prices across the country and offered a variety of solutions. The common denominator of most of his solutions however, was the direction of, funding from, and oversight by the federal government.

At the onset, President Obama announced the creation of a task force to search and destroy “manipulations in the market that might affect gas prices” with particular focus on speculators. Speculators have been the go-to escape goat on oil prices by both the left and right. Unfortunately, the President’s efforts are misguided. Speculators are those trained individuals who — with advanced knowledge of supply, demand, and the effects on each by current events — buy and sell oil at risk to themselves. If they speculate that in light of a new fervent uprising in Iraq or Nigeria will shake the production of oil, they will buy oil, increasing its price. If an oil company strikes a new bountiful oil well, they will sell, and prices will decrease. We rely on speculators’ insight and knowledge of the oil market to give us oil at its market price.

President Obama seems to view things differently. Such high gas prices shouldn’t be so, facts or market signals be damned. Instead, he seeks to root out, regulate, or annihilate the very components of the oil market that make it tick. Just as a contractor has the experience and know-how to complete a project on time and on budget, so too do speculators have the skill to buy and sell oil based on the facts of production. To assume the federal government could “resolve” anything related to speculation is an insulting irony.

Secondly, Obama seeks to expand domestic oil production, a step forward, but caveats such production with more regulation and misguided incentives, two steps backwards. The President wants to unleash new permits to oil companies for drilling off the coast of Alaska, but says in order to make the process streamlined, a new government organization is required. Such logic seems counterintuitive; how is it that more government bureaucrats and red tape will quicken leasing and not in fact slow it down? Moreover, the President wants to incentivize companies to drill in unused leases — leases that do not have production-worthy quantities of oil or gas. So while the president pushes for the end of oil subsidies, he’s more than willing to subsidize unproductive oil wells. Seems a little two-faced. The only thing different between “incentives” and “subsidies” is the name. The money still comes from you and me.

The President has taken a statist approach to solving the “problem” of high gas prices. Yes, gas prices are high, but oil is a limited resource subject to an infinite array of market conditions, current events, weather, and simple luck of the draw in drilling. To demand a set price based on nothing but wishes is anti-capitalist speak. Dictating prices didn’t work for Stalin, Lenin, or Brezhnev; it wont work for Obama.

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