Monday, November 28, 2005

Gas prices and politics.

When Hurricane Katrina hit the Gulf Coast and knocked out approximately 30% of our oil refineries, the price of gasoline went up so high that consumers were outraged.
Who was the person that was vilified for this? George W. Bush of course. The reason given was usually some vague reference to his "cronies" and Haliburton. The common perception being that Bush and the Republicans control all aspects of the price and distribution of oil and its by-products.
After seeing this piece in the Wall Street Journal, the truth has more to do with partisan politics than that of established common perception. It is often very difficult to point to one specific cause for the price hikes. In this case its no long reach to deduce that a large part had to do with our refinery capacity (or lack thereof). After being blamed in large part for these price hikes, the administration has put forward a bill to speed up the process to approve and build more refineries at abandoned military bases. A logical move when one considers that hurricanes will more than likely strike again in the coming years, no new refineries since 1976 and the bases are just sitting there.
So you would think that it would sail right through, right?
NO WAY, it was blocked by the Senate Environment Committee; excerpt from the WSJ linked above;

"Noting that a House-passed bill to streamline refinery permitting also failed to get even one Democratic vote, Mr. Inhofe concludes the nation's refinery policy is now being held hostage to partisan politics. "In the next election, high gas prices will be one of the Democrats' big campaign issues."

This is classic Democratic partisan tomfoolery. The reason I focus on the Democrats is two-fold. One, the hypocrisy of blaming the other side and two, the lockstep nature of the unanimous votes. Next year when another hurricane hits the gulf, they will be the first to point the finger (and give it)to the Bush administration. In other words, block any proposal that is Republican conceived, no matter how critical, just to make sure that there is no chance of favorable press for the "opposition".
As usual, we, the average working stiffs are the pawns in this political game of one-upsmanship. We are going to have to budget another 30 to 50% more for gas money during the next hurricane season. Its amazing how the constituency's needs of these Democrats gets so little consideration and the depth of how low their regard is for the public which they swore to serve. Such arrogance should be remembered by every voter in the next election.


Fahd Mirza said...

In our part of world, when once a price goes up, it never comes down. I wonder where will it stop especially the price of fuel.

roman said...

fahd mirza,
The price of petroleum has always been artificially low here in the states. The government reasons that if they keep demand high, it will stimulate economic growth. The explanation for this is that manufacturing and transportation costs are kept low in order to keep the level of business activity high. This is the government's overall economic stimulus strategy. It has worked well to date.
The price is not really controlled by the government but it has the ability to intervene if there is price gouging at the local state level.
The price has been so low, however, that it needs to be corrected from time to time.
When the price increases, let's say by 50 cents a gallon during each "incident" and later there is a price decrease, the decrease is usually only 30 to 40 cents. So over time there is a steady increase in the price.
So you can see the overall strategy is to wean the public off the low prices gradually so there will be no complaints or worse, like riots.
This process almost takes care of itself. When Hurricane Katrina devastated the gulf coast, the price went up by approximately 35%.
Because of the high price, many consumers began to cut back on purchases (conservation)and demand went down. Once demand went down, there was a larger supply of petroleum available and in order to move this supply (sell) the prices started to come down automatically.
One can drive down a long street and find gas stations selling at various prices. Because of the competition, they must lower their prices in order to keep their customers from going somewhere else. It's a natural process controlled by supply and demand and governed only by a "laissez- faire" ideology.

samrina said...

Well here in Pakistan scenario is quite different ,
yes the prices are set here aswell on demand n supply basis but unfortunately scene is opposite here, supply is low n demand is high. So inorder to control the demand Govt. increases the prices of fuel n yes this never happened i guess as fahd said fuel prices never comes down once been increased :(
yes offcourse this is impacting the economy negatively as due to it transportation costs r high n that leads to inflation n in result other economic factors gets badly impacted :(

Dr Kuha said...

Interestingly enough, Americans on the average DO in fact, pay as much as 5.00 a gallon for gas. The rest of it is in taxes, which translate to subsidies for oil companies, which then fund political campaigns, which get politicians elected, which make sure that government money is and always will be, tied up in oil... No judgement implied.

I think democrats are full of shit...but then again, I also think that republicans are a waste of human flesh.

Dr Kuha said...

You know what I think is interesting...and I kind of wanted to put this under your "It's about time" article, but there were already a lot of comments.... Think back to 9/11 and the weeks and months after it. Is it strange, that you've never seen footage of a plane crashing into the pentagon? Do you find it hard to believe that not a single security camera at the FREAKING PENTAGON didn't pick it up? I mean...the pentagon is our castle keep! I just think it's wierd. I'm not saying it's a conspiracy or anything, but the only footage I ever saw was just a burning building..not a plane crashing into it, like you did with the's just wierd

roman said...

dr kuha,
Agreed! Both sides of the political divide seem to share the same trait. A total disregard and contempt for the needs of members of their constituancy. It never fails to amaze me how a decent human being enters the arena of politics with the best of intentions (well, maybe not all) and then once they're established in their position of power, they keep updating and redefining the word "corruption". It's sad.
About the Pentagon though, it is weird that no moving images were ever produced. One would think that there would be coverage for this event. It may just be that there is coverage but is just not being released under some convenient national security rules.
I say "convenient" because it seems logical to conclude that this incident was a security SNAFU of the worst kind in recent memory. It's CYA for whoever was in charge of the Pentagon security defense measures. A NSA political appointee with no practical experience? Flashback..."Your doing a good job, Brownie!"
We'll never know.

roman said...


Gas prices in your country, even though they increase and never come back down, are at least a more honest way of dealing with this issue. Here, it seems that the government "gives with one hand but takes away with the other".