Monday, March 5, 2012

Gasoline And Capitalism

As gas prices continue to increase, the presidential candidates are thinking that this could be the issue to help give them leverage and are blaming the President. The problem with this is that all of them claim to be true capitalists, so shouldn't the market be the one to determine prices? If so, why should the President be doing anything, that would be interfering with the market which is what they say they are opposed to.

Now the bigger problem with their arguments is that there is little the President can do, for several reasons. The first is that prices always go up in the spring in preparation for summer driving periods. The second is that the prices are not being affected by a gas shortage. In fact we currently have a surplus in oil supplies and are exporting more than normal because demand is down. The third is that it not supply and demand driving the price, instead it is oil speculation. Wall Street is doing the very same things around gas as they did last time we were at record prices. So it has little to do with supply and demand, but instead outside forces that really have no bearing on reality.

Finally, those pressing the President say that if he had approved the Keystone XL pipeline that gasoline prices would be going down. The problems with this argument are numerous, mainly being that the pipeline does not even have any plans formally drawn up yet, so we are minimum 10 years away from it having any impact for us. In addition, Canadians are also opposing the line so even if the President were to say okay, it still might not get built because the Canadian government has not approved it.

But, even if we were to have the pipeline in place our gas prices would not be affected because it has nothing to do with the amount of gas available. In addition, best guesses are that the oil fields in Canada will only provide us with 100 years of supply, based on current usage. The problem is usage continues to increase and 100 years is not really all that long from now. The answer is not drill baby drill, but instead, converse and find alternative energy sources, all things the President is pushing for.

Update 3/6: Here is an even better statement on the issue.

No comments:

Post a Comment