At even $3.50 a gallon, gas is no more expensive now than in the 1950s, when it was in the range of 20 to 30 cents a gallon.
Not if you use the Binswanger deflator of 15-fold to 20-fold.
Nonetheless, we would expect gas to be considerably cheaper, like almost every other reproducible good, after 50 years of technological progress. I don’t claim to have expertise in the energy market, but two factors obviously account for the price being higher than it should be: our failed “policy” in the Middle East and environmental regulations. In regard to the latter, the Democrats who are blaming rising gas prices on the president are the very ones who scuttled his attempt to lift even a few regulations on drilling offshore and defeated his proposal to start drilling in Alaska (ANWR).
But rather than make political hay, as he should, about the Democrats shackling oil production, President Bush has chosen appeasement: he has pledged to go after “price gougers” at the pump and wants to remove some tax breaks for oil producers.
CNN reports:
“Bush also has ordered a federal investigation into possible cheating, price gouging or illegal manipulation in the gasoline markets.
“Bush said consumers must first be treated fairly at the gas pump.
“‘Americans understand by and large that the price of crude oil is going up and that [gas] prices are going up, but what they don’t want and will not accept is manipulation of the market,’ Bush said. ‘And neither will I.’
“Bush also called for a rollback of $2 billion in government assistance and tax breaks for oil companies over the next 10 years for items such as research and development for deep- water drilling.”
Someone is indeed not treating us fairly and is manipulating the market, but it is the government.
I wish I could have been a fly on the wall at the meeting where the Bushies decided to appease the Democrats. Bush’s advisors must know that charges of business manipulation are nonsense and that “price-gouging” is a Marxist smear. So what did they say at this meeting? Maybe something like, “We can take some of the heat off us by re-assuring the public that we are against price-gouging.”
The blindness of such reasoning is staggering. Since when did Republicans ever reduce the criticism by acting like Democrats? Every Republican tries that form of appeasement, and it has never worked. Never have Democratic critics patted Republicans on the back and said, “Good job, now you’re starting to get it.”
Nixon went to China and began the process of betraying Taiwan. He imposed wage and price controls. He rightly ended the draft. He got us out of the Vietnam war. Did all of that lessen the “heat” from Democrats? Did it prevent them from hounding him out of office in disgrace?
In Reagan’s second term, he was virtually the puppet of the New York Times. Did that appeasement lessen the left’s virulent hatred of the man? Did it stop them from trying to oust him over the Contra arms deal?
Just as appeasement doesn’t work in foreign policy, so it doesn’t work against one’s domestic critics. It only serves to embolden one’s enemies.
And guess what the Democrats’ response has been to Bush’s latest act of domestic appeasement?
“After the speech, Democratic Sen. Charles Schumer of New York accused Bush of failing to get tough on powerful oil companies.”
“[Schumer said] ‘We all know it’s the big oil companies who are causing these massive price increases that go way beyond what supply and demand would merit.'”
Rather than attacking “price-gouging” and “manipulation,” Bush should be saying to his Democratic critics, “So now you’re happy? You got what you wanted: you’ve strangled production and refining. Mr. Gore, you wanted to penalize those driving “gas-guzzling” SUVs? Well, we don’t need your ‘carbon tax’ now to do it.”
To eschew appeasement, one has to be morally confident of the rightness of one’s own position. Bush and his advisors aren’t.
On the economic level, observe the indecency of railing against oil producers at the same time one is professing outrage against high oil prices. A time of high oil prices is the very time we should be increasing tax breaks to oil producers. We need them to make as much profit as possible. High profits are both the motive and the means for expanded production.
But for the infantile worldview of the left, oil companies are just storing up their higher revenues in giant money bins, like the money bin of Scrooge McDuck in the old comic books.
Scrooge kept his billions in cash in a giant bin with a diving board installed on its open top. Then he’d dive off it, into his cash. That’s what the left thinks being rich is.
The left’s concept of greed is the desire to hold money not to make money. This is the only possible explanation for their inability to grasp that oil profits are re-invested in expanded production. Revenues are re-invested precisely because that’s where the profits are to be made.
I heard on CNN that the President said that oil companies have an obligation to re-invest their profits. Ironically, that’s correct–not a social obligation but a selfish one: they have an obligation to their owners to make as high a profit as possible, and oil production is where the highest profit is now.
But don’t take my word for it. Here’s what CNN reports: “Oil companies reported record profits in 2005, led by Exxon Mobil, which said it made $36.1 billion–the largest-ever annual profit for a U.S. firm.”
To get the highest available return, Exxon Mobil’s selfish greed morally obligates them to put that $36.1 billion into their business. And in case Senator Schumer doesn’t know it, that business is producing oil and gasoline.
This isn’t rocket science. It’s economics 101, and it’s already well known (except to the media). But the morality of altruism trumps economics and leads to Bush’s “appeasenomics.”
