I am no big fan of USA Today, but today I am. Brad Foss of the Associated Press, has an excellent article on what is driving gas prices, supply and demand. The worldwide demand for oil is up, particularly with the growing economies of India and China. Add in the trouble spots of Nigeria, Iraq, and Iran, and you have a higher demand for oil and an unstable supply. The result is higher oil prices. As oil prices go up, so do gas prices. It is that simple.
The most pressing source of anxiety in the market stems from the possibility that Iran, a key oil exporter, could cut supplies because of international pressure to modify its nuclear program. Unrest in Nigeria, war in Iraq and rising resource nationalism in South America have added to oil-market worries.
Some 500,000 barrels per day of Nigerian production, most of it operated by Royal Dutch Shell PLC, remains off-line as a result of violence there, and more than 300,000 barrels per day remains shut down in the Gulf of Mexico since Hurricane Katrina smacked offshore platforms.
Strong global demand and a limited supply cushion magnify the significance of these events, while a surge of investors betting on oil and other commodities has also lifted prices.
Lately, inventories are creeping up. Under our supply and demand model, prices go down with a larger supply of oil. And guess what, they have been going down.
Light, sweet crude for June delivery fell $2.83 to $69.45 a barrel on the New York Mercantile Exchange. Prices had plunged $2.33 Wednesday after the Energy Department released its weekly report showing a supply rise as refineries boost output and demand flattens.
It is a shame lawmakers are turning this issue into partisan politics. Of course, it may be that the average congressman is just not smart enough to make the connection between the price the oil companies pay for a barrel of oil and the price of a gallon of gas at the pump, but I don’t think so. I believe they are playing pure partisan politics. Unfortunately, the Republicans are falling for the game the Democrats are playing.
Gas prices aren’t just angering consumers. They’re also fueling political fallout. It’s a source of heated debate that’s sure to become an election issue.
And unfortunately, it will be a political issue. But is a sense, maybe it should. It was the Democrats who have blocked drilling in ANWR, who have blocked the building of new refineries, who have blocked drilling for oil off the coasts of the east and the west and the Gulf of Mexico. It is because of the Democrats that the US has an inferior supply of oil.
One of those politicians who continually show they are totally out of touch with reality is Dennis Kucinich of Ohio.
“People are actually going into their change jars to go to the gas station to be able to pay for the increased costs of gas,” said Rep. Dennis Kucinich (D-OH).
These people don’t have a clue. If Kucinich truly believes people have to rob their piggy banks to buy gas, he is crazy, unless he has a larger bank than I do. Gas prices are high. And until we find a new source of oil, a new source of energy, or use less oil, we are going to have high gas prices. And anything you get out of a piggy bank is not going to buy much gas.
The solution to these high prices is so simple, few will think of it. Do NOTHING. The market will correct itself. The only other solution is to increase the supply of oil like drilling or alternative energy sources. I really like the ideas of Kevin Hasset of the American Enterprise Institute.
“Republicans are capitulating to pressures to do something, even if they would be doing things that make no sense,” said Kevin A. Hassett, a senior economist at the American Enterprise Institute. “The proper course is to let the remedy for high prices be high prices. If it turns out that biofuels are more economical, then you don’t need government subsidies.”
In the end, the market works everything out. Why is that so hard for all of these politicians to figure out? I can understand the Democrat’s reaction, even though they are wrong. The Dems never saw a new law they didn’t like. It is a typical knee jerk reaction to fix everything, even the economy. Note to Democrats, trying to regulate the economy does not work. It stymies competition and leads to less produce, which lead to higher prices . If you leave the economy alone, it will work itself out.
What I can not understand is the reaction of the Republicans. They know the unwritten law of supply and demand. They know that trying to fix the economy does not work. The only conclusion is, the Republican Party is scared. They are afraid the American people will not understand how the market works and will blame the party in power for their economic woes. If past history is any account, they are right. The average American Joe does not understand how gas prices work and who is responsible. George H.W. Bush lost the election of 1992 to Bill Clinton because people did not understand how the economy worked. But there is good news. Recent polls suggest people are blaming the oil companies for the high price of gas.
Yet the Republicans in Congress still does not get it. Note to Republicans, do not play the game the Democrats are playing. It is a losing hand. Right now the Republicans are folding with a pat hand. What the Republicans need to do is to educate the American people on supply and demand, explaining why gas prices are so high.
Telling the truth often is the only way to win.
Tags: Culture, Politics by Chuck
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