High gas prices are a bipartisan failure

Neither Republicans nor Democrats are offering up policies that will effectively address high gas prices.

Vernin Ogrodnek/AP/Press of Atlantic City
Gas price sign at Linwood Gulf, in Linwood, NJ, April 20, 2012. Holland argues that despite Republicans and Democrats slinging blame at each other over high gas prices, neither side has offered any feasible solutions to the problem.

Red Herrings: Speculation & Regulation

As I noted last week, I have been working on a short paper for ASP on gas prices. It was published earlier today with a title of “Cause & Effect: U.S. Gasoline Prices.” I also published an Op-Ed in The Hill “Running on empty: Failing to address high gas prices“ and was quoted in Reuters saying “The truth is, neither party is offering policies that will effectively address high gas prices.”

The report seeks to get beyond both party’s preferred narratives on gas prices and looks more deeply at the root causes of today’s high gasoline prices. Hopefully, it will puncture some of the assertions and rhetoric that both political parties use about gas prices, whether it’s shouting “speculation!” by those on the left or “too much regulation!” by those on the right.

The truth, of course, is that crude oil is the essential ingredient to 90% of our gasoline supply (ethanol is blended in to provide the other 10%).  Although gasoline prices vary widely around the world due to differing tax regimes, regulatory rules, and market requirements, crude oil is a globally traded commodity with prices set in a global marketplace.

This Isn’t the 1950′s

The root problem with the politics of gas prices in the U.S. right now is a failure to admit that we are only a (relatively) small part of a global market. It is as if we were stuck in the 1950s, where production from the U.S. was more than half of the world’s production. Republicans think that all we need to do is produce more, and prices will come down, while Democrats think that it’s all about how Wall Street trades oil contracts. These measures would probably work if the U.S. were producing and consuming half of the world’s oil production. But, in a world where we’re responsible for 9% of production, while consuming 20%, we simply do not have the ability to control prices.

The American market is no longer the most important factor in prices; growth in countries like Brazil, China, and India means that we are at the whims of global prices.

If anything, it is the threat of another war in the Middle East that is driving up prices. A conflict between Israel and Iran, possibly including the U.S., would put the 15 million barrels of oil per day that sails through the Strait of Hormuz at risk. Oil speculators are rightly placing a ‘risk premium’ on world oil supplies because a closure of the Straits of Hormuz would catastrophically drive up the price of oil.

I think the only thing that American politicians could do to reduce the price of oil in the short term, and hence the price of gasoline, is to diplomatically resolve issues with Iran, not further ratchet up tensions.

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. This post originally ran on www.consumerenergyreport.com.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.