What’s the cause of $4 for a gallon of gasoline? To listen to Democrats in Congress and on the campaign trail -- and also some Republicans -- the answer is “price gouging,” “speculation,” “oil companies” or “the failed policies of George Bush and Dick Cheney.”
Everything is getting blamed except the well-documented obvious: the law of supply and demand.
The history of U.S. energy policy is that Democrats have refused to increase supply and Republicans have refused to curtail demand. They are both to blame for $4 gasoline -- and they'd better get together to keep Americans from paying $200 a barrel to foreign oil producers.
Here’s what the federal Energy Information Administration says: “A variety of factors have caused oil prices to increase, including strong demand growth in non-OECD Asia and the Middle East, no growth in production since 2005 from the members of the Organization of Petroleum Exporting Countries, rising costs for oil exploration and development, across-the-board increases in commodity prices, and a weaker U.S. dollar.”
Simple translation: China and India are buying lots more oil, increasing overall demand, and OPEC is not producing more supply. Under such circumstances -- duh! -- prices rise.
Additionally, the United States, with its interest rates too low and chronically consuming more than it produces, has seen its currency lose value, so that every barrel of oil (and bushel of wheat) costs more.
The EIA analysis says not a word about oil company "gouging," futures market speculation or refusal by U.S. oil producers to exploit the exploration leases they pay billions for -- all the reasons being bandied about by Congressional Democrats (and a few Republicans) and Sen. Barack Obama.
The Democrats have an obvious motive for their denial of Econ 101 reality: They are so beholden to the environmental lobby that they can't advocate increased domestic oil and natural gas production.
To save the planet from global warming, the greens want to end mankind's use of fossil fuels, so they oppose drilling for natural gas offshore, for oil in the Arctic National Wildlife Refuge and exploiting America's vast coal reserves. And Democrats obey, as do some Republicans, recently including Sen. John McCain.
The greens for years have also blocked new nuclear plants, although some have changed their tune because nuclear is carbon-free. Most Democrats remain opposed, while Obama is wishy-washy on the subject. McCain, to his credit, favors nuclear and always has.
McCain’s fellow Republicans also are to blame for $4 gas. It took ex-oilman Bush six years to discover that America is "addicted to oil" and begin promoting conservation and alternative energy sources.
If Democrats still refuse to increase U.S. supplies of oil and gas, Republicans for years have refused any measure to decrease demand -- by taxing gasoline to encourage conservation, raising auto fuel-efficiency standards or investing in nonpetroleum alternatives.
Just suppose, when gasoline cost $1.71 a gallon -- as it did in 2001, when President Bush came to office -- that the federal government had increased gasoline taxes by $1 or $2 and used the money to build infrastructure and invest in alternative-energy research, rebating some to poor people.
For seven years, the public would have been buying more fuel-efficient cars -- as they are now -- and domestic auto companies would have had an incentive to develop hybrids and electric cars.
