Sunday, September 14, 2008

OPEC, Ike, and the Political Price of Gasoline

I was driving past a gas station with my friend Zoe when she asked,"What happened to gas?" I looked and saw that the relief from $4.00 gallons of gas was over. The price, which had dropped nearly $.50 over the past couple weeks was now back to over $4.

My thoughts went first to OPEC, who cut production quotas by half a million barrels. Their attempt to stem the slide of oil prices, now at $100 from $147 two months ago, was unsuccessful as futures markets refuse to play ball. Prices are also being kept "low" by a strengthening dollar, and since oil is priced in dollars, nations with a weaker currency are feeling a pinch, further cutting demand for oil.

Yet gas is back over $4, even though oil is 30% cheaper. What gives? And then I remembered Hurricane Ike. Of course, we have oil drilling, shipments, and refineries throughout the gulf, and there's nothing like a hurricane to drive up the price of gas. Whether it's a true marker of production loss or just oil and gas companies trying to earn a few million more, I don't know, but I'm not complaining.

I applaud anything that raises the price of gas, from OPEC production cuts, broken refineries, or increased taxes. This country needs to move off of oil, for both environmental and energy security reasons, and the only system with the power to make a change on that scale is the market. Mileage standards for cars won't do it, bitching by global warming alarmists won't do it, but an extra dollar on the price of gas has cut U.S. consumption by nearly 4% in just one year. Concern over efficiency has never been higher, and the one and only reason is the price of gas.

John McCain and Sarah Palin's energy plan involves drilling in the Gulf and ANWR. Not only will this be worthless (these places can sustain approximately 2% of American demand), it will set us back on the road to alternative energy. It will depress prices and maintain the unsustainable oil and gas market for a few more years. It is a band-aid that reduces the pain now while it slows the healing.

Obama's plan, while redistributionist and quite annoying, may accomplish the goal. He wants to tax the oil companies and give the money back to citizens to help them with energy costs. Of course the oil companies will raise the price on gas to cover the nasty taxes, but higher gas prices is what we want. And he wraps this painful package (because higher gas prices are painful) in a pretty rebate, the spoon full of sugar to help the medicine go down. A plan to directly raise gas taxes would be politically disastrous, but to hide it in a "windfall profits tax" on those greedy oil companies is damn near brilliant. It could be more effective if we used it to pay the national debt instead of giving the money back to citizens, but I'll take what I can get. I was losing hope in Obama, but I see now that he might know what he's doing after all.

No comments: