American Elephants


Hard Choices: What’s Right Or What Will Buy Votes. by The Elephant's Child

Expectations about public policy have an enormous impact
on the market price of gasoline.

Holman Jenkins, writing in the Wall Street Journal, points out that candidate Gingrich’s energy  plan would put “the U.S. government unambiguously in favor of cheaper gasoline. He’d arguably be the first president since Reagan who didn’t believe gasoline is a bad, obsolete product and priced too low.”

Don’t underestimate the psychological and political upheaval this would bring about. For decades, U.S. policy has been riven with a costly ambiguity about Washington’s real aim for gasoline prices. In 2008, both parties nominated climate warriors for president, and both parties at times have favored dramatically increased fuel-mileage mandates, which imply higher gas prices unless Washington intends auto makers to go broke selling vehicles consumers don’t want.

For decades, too, the EPA, in pursuit of relatively small air quality gains, has been allowed to balkanize the U.S. refining market with “boutique” fuels, driving up the price everywhere. For decades, environmentalists have been empowered to put domestic resources off-limits not just to preserve pristine nature, but to express disapproval of our energy “addiction.”

Every once in a while these urges even threaten to coalesce into coherence with an outright policy of higher gasoline prices, as when the Clinton administration flirted with a BTU tax or the Obama administration plumped for cap and trade.

Back in the real world, politicians are in a state of panic when faced with the higher gasoline prices that are a direct result of their policies. President Obama was confronted with this paradox  at the White House press conference this week. His response was interesting: “Do you think the president of the United States going into re-election wants gas prices to go up higher? Is there anybody here who thinks that makes a lot of sense?”

When Obama took office, gasoline prices averaged $1.89 a gallon.  Today, here in Washington state, the average is hovering right around $4.00, though the national average is lightly lower. Democrats in Congress are considering ways to go after “oil speculators.” The president is more interested in going after the oil company CEOs. The 1%, you know.

On Thursday, the Senate voted on an amendment that would fast-track the $7 billion, shovel-ready Keystone XL pipeline. Eleven Senate Democrats crossed the aisle to vote to eliminate the need for a federal permit and addressed environmentalists concerns by allowing Nebraskans to determine the route. Senate Republicans voted unanimously for Keystone, which would bring 830,000 barrels of crude oil from Alberta to gulf refineries, easing supplies and creating thousands of much-needed jobs.

The president put his press conference response aside and worked the phones hard, lobbying Senate Democrats, The final vote was 56–42, meaning a majority voted to strip the president of authority to block the pipeline, but it was 4 short of a filibuster 60-vote threshold to make it stick. Obama owns the Keystone XL Debacle.

Obama’s constant refrain “There’s no silver bullet” does not hold. Here are just a few things that could bring the price of gasoline down.  State and federal taxes on gasoline average 45.7 cents a gallon, with the  highest in New York at a combined 67.4 cents a gallon, and the low in Alaska at 26.4 cents.  A number of analysts have noted that the Fed’s devaluation of the dollar has led directly to higher oil prices, adding as much as 56 cents a gallon.

Federal and state rules require about 18 separate boutique fuels, or local blends, about what can be and can’t be in their fuels. Sen. Roy Blunt has offered a bill to give the EPA more authority to waive these local rules. There are a long list of environmental rules— in 1999 the EPA required refiners to drastically cut the amount of sulfur in gasoline and diesel which cost the industry almost $5 billion and $1.5 each year. Environmental rules have driven smaller refiners out of business, closing 4 on the East Coast which makes gas more expensive in the region.

Environmental rules require refiners to add 6.6 million gallons of “advanced biofuels” to their product. The law has cost refiners almost $7 million in fines, since these advanced biofuels don’t exist commercially and nobody knows if they will, which means bigger fines as the mandated amount increases.

So, there is not much that a president can do about the world price of oil, but there’s a lot that is quite possible to do in this country to lower the cost — if one so chose.


1 Comment so far
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While no politician likes to look foolish, Obama is an extreme example. Having said that “There’s no silver bullet”, he now damn sure going to make sure there isn’t one (or at least isn’t one that he can’t take credit for).

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Comment by Lon Mead




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