It's All About Oil

Yesterday, Senator John Kerry argued the price of gasoline is at "an all-time high" and George W. Bush is to blame. Is Kerry right on either point? Does candidate Kerry proffer any practical policy to reduce gas prices?

No and no. It's just more Democrat pessimism floated to foster fear--but verifiably false. Unquestionably, a fill-up is more expensive than last year. But as Mike Myers shows--no, not that Mike Myers; the Mike Myers who is economics reporter for the ultra-liberal Minneapolis Star Tribune--gas remains cheap:

Once inflation is taken into account, today's gas prices are not even close to the highest in U.S. history. What's more, the share of consumer income required to keep tanks filled is lower today than for most of the 20th century. By that yardstick, gas is cheaper than it was in the 1920s, the '30s, the '40s, the '50s, the '60s, the '70s and much of the '80s.

The WaPo agrees.

In comparison with other consumer products, gas remains a bargain, as Nick Schultz entertainingly explains in NRO:

[A]ccording to Reuters, the highest gas prices in the country [are] $2.12 a gallon. So how does that compare with other consumer products like, say, the source of the Heinz-Kerry fortune: ketchup?

At the big-box retail outlets Sam's Club and Costco, ketchup sells for about $0.04 an ounce or $5.12 a gallon -- a little more than twice the price of gas.

But that's not the best comparison. Americans typically don't buy gas in bulk the way they buy foodstuffs at Costco. Ketchup at a retail grocery store is $0.16 an ounce meaning it rings in at an impressive $20.48 a gallon, almost ten times what gas costs.

Gas is also cheaper than orange juice ($6.64 a gallon), Snapple ($10.32 a gallon); olive oil ($51.04 a gallon), eye drops ($995.84 a gallon) and nasal spray ($2,615.28 a gallon) according to figures from the Department of Labor, Consumer Price Index.

But pretending Kerry's correct, are gas prices the fault of President Bush? No according to Northwestern University economist Lynne Kiesling:

First, world crude prices are high, thanks in part to OPEC and tumult in Venezuela. Second, she points out that "existing environmental regulations" -- such as those limiting flexibility at refineries; market-distorting state environmental regulations; mandates for ethanol additives and the like -- "are making supply more inelastic." Lastly, new clean air regulations are taking effect in 2004 leading to higher short-term prices.

Ok, but if you assume Bush is to blame, what's the Haughty Hairdo's remedy? According to Forbes,

1) Pressure OPEC to increase (or at least not decrease) production;

2) Quit replenishing the "strategic petroleum reserve;"

3) Conform state and local pollution requirements, so gasoline can be more interchangeable from region to region;

4) Subsidize research on alternative sources of energy;

5) Aggressively develop oil and gas supplies in the deep waters of the Gulf of Mexico and other places "where it makes economic and environmental sense to do so;"

6) Raise the minimum federal automobile fuel economy standards; and

7) (perhaps, according to the WaPo) Increase the gas tax by 50 cents.

Number 3 makes perfect sense. That's why the President proposed emission uniformity in energy bills in 2001, 2002 and 2003. Senator Kerry either voted no or was AWOL. Another flip-flop.

The rest of Kerry's ideas range from stupid to laughable. How could America up the "pressure" on OPEC without either "credible threats of some kind" or further kowtowing to noxious Arab governments such as Saudi Arabia? In any event, as Ms. Kiesling notes:

Most Americans do not realize that our largest oil supplier is Canada. No, not largest after Saudi Arabia -- largest, full stop. . . .Thinking of North America as an integrated energy market and improving oil and natural gas delivery infrastructure (such as pipelines) would enhance our energy trade from our closest neighbors, and reduce OPEC's market power. That's a more constructive and concrete recommendation than trying to persuade OPEC to stop; the most persuasive way to make OPEC stop is to stop buying from them. Vote with our dollars instead of whining.

As for diverting supply from the U.S. reserve, that reserve was created for an energy crisis, not a temporary price spike. Moreover, Severin Borenstein, director of the University of California Energy Institute, explained that "diverting oil from the strategic reserve would not have much of an effect, because the amount that goes into the reserve each day is too small to affect the U.S. market." Strike that one.

Well, what about Kerry's proposed subsidies for "renewable energy sources like wind, solar [and] hydro-electric" "to make 20% of electricity and fossil fuels be from alternative (non-oil) energy sources by 2020?" It's been tried--and has failed, at enormous cost to consumers. Substituting ethanol for petroleum (supported by Bush as well as Kerry) "cost taxpayers more than $10 billion over the years, . . remains uneconomical, [and] consume[s] much energy -- some say more than it produces." Solar power's still years away from practical efficiency. Besides, solar and wind power require lots of land--and thus draws fire from environmentalists. The same greens often oppose expanding wind and hydro-electric power--wind power kills birds and dams destroy the upstream ecology. So "alternative" energy's not practical.

Ok, but surely there's additional domestic oil? One problem--the cheapest, largest American oil reserve lies beneath Alaska's (barren) Arctic National Wildlife Refuge--where Kerry vigorously opposes drilling. By contrast, most "deep water" oil already is tapped; few "new" fields remain. Besides, don't Democrats oppose "offshore drilling" out of concern for oil spills?

How about Kerry's plan to increase vehicle fuel economy by 50 percent? Kerry's approach "would be the largest increase, by far, since automotive fuel economy standards were first imposed after the oil shocks of the 1970's." That would significantly up car prices. Moreover, because automakers increase fuel efficiency mostly by decreasing a car's total weight, Kerry's plan would reduce vehicle safety and cost lives. Explain that to the voters. Even the NY Times concedes that "[f]ew think even Mr. Kerry, Democrat of Massachusetts, could actually make good on such a plan if he were elected president."

That leaves Kerry's previous plan to increase the gas tax. But increasing the federal tax on gas. . .increases the price of gas! Some solution. Ed Reid says he's uncovered Kerry's goal--giving the U.S. a makeover until it resembles France:

[H]ad we only had enlightened administrations like those in Europe all these years. We could have been paying $4.00 per gallon years ago; and, we would all be living in flats in cities and driving upholstered roller skates.

President Bush said it best: "The problem with that plan is that someone has to pay for it and that somebody is gonna be you."

Liberals still believe Bush's policies are "all about oil." By campaigning to reduce the cost of gas, Kerry apparently agrees. But candidate Kerry's doom and gloom energy policy starts with fuzzy math, wrongly blames Bush for Arab whims and pushes expensive and impractical solutions. It doesn't add up.

And, come to think of it, Bush neatly summarized the Democratic party platform in general: someone has to pay for it and that somebody is gonna be you.