It is projected by some economists that gasoline prices will reach $5.00 per gallon by Memorial Day weekend. That is only a little more than a month from now, and there is no end in sight to the rise.
The problem of high gasoline prices has many complexities to it, but as it has become a political issue, it seems like the simplicities of the mechanics of rising prices has been lost. The bottom line is that there is a lot that can be done to alleviate rising prices. The solution is available and immediate.
Rising gasoline prices are a serious issue because everyone, yes, everyone, depends fuel. Even those who choose not to drive a vehicle are confronted with the higher fuel prices that are built into the products and services at purchase. Not only are consumers paying for ever increasing prices at the pump, they are also paying for the increased shipping costs associated with transporting products, such as food and durable goods, to the market place. Unfortunately, this increase in gasoline prices necessarily lowers everyone’s individual and collective wealth, i.e., the money that could be spent on other things is spent on the increased price of gasoline.
The President cannot sit this one out. According to recent reports, in response to issue of the high prices of gasoline, on April 6, 2011, President Obama told workers at a wind turbine plant outside Philadelphia, “I’m just going to be honest with you. There’s not much we can do next week or two weeks from now.” Since the progressive ideology, like the one that has been espoused by President Obama, aims for less consumption of oil for the benefit of the environment, this issue of rising gasoline prices has become a political opportunity.
The liberal ideology present in American society has recognized increasing gasoline prices means less fuel consumption, less consumption means less carbon output, less carbon output is better for the environment; hence, the automatic advancement of the liberal agenda. The political answer: let’s keep the American public believing there is only so much that can be done, conversely, we are doing everything we can. We just have to wait and ride this one out, no pun intended.
Since gasoline prices are directly tied to oil prices, it reasons that if oil prices are brought back into control, the price of gasoline will be brought back too by the corresponding measure. The skyrocketing price of oil has been ascribed to the unrest in the Middle East; yet, the price of oil, unlike the price of many other commodities, is based on “oil futures” or what investors “think” the price of oil will be in the future. In sum, when there is a belief or a concern that the price of oil will rise, hedge funds invest accordingly. When there is increased investment, the actual price of oil rises. A lot of the “oil futures” price depends on projections and profits, not the actual amount of oil that is pumped from the ground.
In fact, the U.S. Energy Information Administration (EIA) reports that Libya’s No. 1 customer is Italy, which bought 28 percent of Libya’s exports in 2010. Italy was followed by France, at 15 percent, then China, at 11 percent. After that, Libya sold to Germany, 10 percent; Spain, 10 percent; Greece, 5 percent; the United Kingdom, 4 percent, and United States, 3 percent. So if the Unites States receives 3 percent of its oil imports from Libya, how is it that gasoline prices have risen approximately 13.5% in California since the beginning of this year? The answer: “oil futures”, i.e., high projections and a lack of confidence in lower oil prices.
There are ready and immediate solutions. First, President Obama can do his part to lower oil prices by building confidence. Instead of telling the American people, basically, there is little more that can be done, so get used to it, the President can come out and advise Americans that the United States is going to take more drastic, immediate measures, like increasing future domestic drilling, lifting the moratoriums that have been imposed on current domestic drilling, and temporarily suspending the federal “per gallon” tax on gasoline.
Unfortunately, President Obama’s ideology won’t let him do that. In the same speech in Philadelphia, the President said he envisions “a future where America is less dependent on foreign oil, more reliant on clean energy produced by workers like you.” That is all fine and good, but these are the kinds of statements, such as placing hope in an undeveloped technology, that has caused concern and unrest in the energy market. These legitimate concerns in the energy market cause unease and unpredictability, which causes oil futures to rise.
The bottom line is that there are ready and immediate solutions to lower gasoline prices. It will just require practicality and sense to triumph over politics.
email: michaelpolitico@live.com
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