Clear Fog Blog

Political musings from Warren E. Peterson

High Cost of Gas, Our Fault?

Posted by Warren Peterson on April 4, 2008

Who’s to blame for the rapid rise in American gasoline prices? Worldwide demand for oil has affected the price but demand does not fully account for US gas price increases. Democrats in Congress point to the record profits of the oil companies and say they are the culprits. But the truth is Americans themselves play a major role. We demand more and more from our government – earmarks, health care, pristine environment, economic security, etc. – but our elected leaders lack the intestinal fortitude to ever say, “No, we can’t afford it.” And if they do, we punish them at the polls for not supporting our favorite issue or interest group.

The historical prices for crude oil to the US has risen almost exponentially not because there is any shortage of oil or OPEC shenanigans. It is high because oil is priced in US dollars and the value of the dollar vis-à-vis other world currencies has dropped dramatically. Part of the problem is the Federal Reserve actions (lowering interest rates and creating money) to manage growth, inflation and the banking crisis. Add to this, an increasingly out of balance budget and commensurate borrowing to fill the gap and foreign confidence in the dollar sinks. So to keep from losing purchasing power, the oil sellers raise the dollar price. Demand and speculation has driven up the price of oil in Euros and Dollars too but not nearly as much as in dollars. The difference is the weak dollar.

If pressure for spending is not trouble enough, our concern for the environment causes some tree huggers and economists, who view the automobile as Satan in sheet metal, to support increasing gas taxes to discourage driving. After all, Europe has had gas prices above our levels for years so why shouldn’t we? This same group, including out current crop of presidential candidates, refuse to consider drilling for oil in Alaska and off our shores. The huge US reserves in oil shale meet another list of environmental objections.

Unfortunately, we have an oil-based economy with no significant change in sight. With a presidential election year and the economic downturn, there is little chance of any meaningful action on gas prices by Congress. We will just have to suck it up for the balance of 2008. That’s not to say there is nothing we can do. We can support the presidential candidate committed to fiscal responsibility, and it’s not Hillary or Barack.


One Response to “High Cost of Gas, Our Fault?”

  1. stephen said

    I have been to Europe, mainly in Germany, and I found the goverments there pay the same price we do. The people pay 3/4 of the price of gas is taxes. The problem is the same here in America, we the people pay 3/4 the price of gas in taxes. What a lot of people do not understand is this: The rich do not pay taxes, we the people pay it for them. How do they do this? Simple; the rich are taxed .02% on what they sell, then the rich add .02% on to the product that they sell you.
    I have been keeping track of the price of gas I pay for the past 9 years. I notice the biggest raise in price is after the goverment adds more taxes. What people fail to ask is who has been in charge of the county for the past 30 years. The solution is less taxes.

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