April 27, 2006

Logic rationing

Gas prices once again are climbing up. (And no, I don't like it.) That means two things:
1) Market forces are at work.
2) Politicians must posture pretending they can do something.
I know that it's glib to say (1), but consider this CBS News report from last week noted that

American drivers in some areas are seeing pumps run dry.

So there has been a supply problem getting fuel to the gas stations. Not only that but, demand hasn't gone down. According to Nick Schultz (via Instapundit)

But what's more interesting about these stories is what they don't tell you. For example, the Associated Press reports that "surveys indicate drivers won't be easing off on their mileage, using even more gas than a year ago."

As far as (2) goes, don't you think they've helped us quite enough?

Republicans defensively point to their passage last year of the energy bill as evidence that they are "doing something" -- reducing dependence on imported oil and encouraging greater use of ethanol in gasoline.

How ironic. It is precisely the energy bill -- along with international events -- that is causing the prices to increase.

"Gasoline prices are up 60 cents over last year at this time," says Dan Gilligan, president of the American Petroleum Marketers Association of America, which represents fuel distributors nationwide. "Forty-five percent of that is higher crude prices, due to reasons we have little control over: political instability in places like Iran and South America, Chinese demand, etc.

"But 15 percent of that increase is due to the effect of last year's energy bill."

Because government requirements have interfered with the supply of gasoline.

Nothing suits a politician more than pretending he can effect something he has no control over. It's the way he can convince future voters of his indispensibility.

Yes gas prices are high. But adjusted for inflation, not at all out of line with the past. (again via Instapundit)

Finally, the idea that taxing the windfall profits that oil companies are supposedly making is just more empty rhetoric; the profit margin of the oil and gas industry is not particularly high. As Jeff Jacoby noted a few months ago

Smacking oil bosses around may be good politics, but the unglamorous fact is that big oil's earnings, 7.7 percent of income in the second quarter of 2005, is lower than the US corporate average of 7.9 percent. The oil industry is more profitable than some (automobiles, media, utilities), but it can only envy the profits earned by semiconductors (14.6 percent), pharmaceuticals (18.6 percent), or banks (19.6 percent). Exxon didn't hit the big jackpot any more than Senator Gregg did.

In fact, the real gas and oil profiteers weren't represented by the CEOs getting grilled on Capitol Hill last week, but by the demagogues doing the grilling. Over the past 25 years, according to the Tax Foundation, oil companies paid state and federal taxes of more than $2.2 trillion (in inflation-adjusted dollars). During the same period, the companies' profits totaled $630 billion -- less than a third of the government's take. Government revenue from gasoline taxes alone has exceeded oil industry profits in 22 of the past 25 years

I guess I have to give Sen. Menendez credit for thinking about breaking his tax addiction. One of the two aspects of gas prices that politicians can affect are the taxes. I'm glad that he seems to be aware of his own limitations. Most politicians are not.

UPDATE: Outside the Beltway has more on how government regulation pushes gas prices higher.

UPDATE II: This post is included in this week's Carnival of the Capitalists located at Interim Thoughts. Other entrants including JackDied, Gongol and Fearless Philosophy of Free Minds all weigh in with similar ideas of wanting government to do less not more.

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Posted by SoccerDad at April 27, 2006 6:49 AM
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