PACKET EDITORIAL, April 28
By: Packet Editorial
With the price of gasoline headed north of $3 a gallon, it is perhaps not surprising to see common sense in the White House and political courage on Capitol Hill headed directly south.
The nation’s anxiety over the rising cost of gasoline has drawn a predictable response from President Bush, whose first instinct was to ease environmental constraints on the petroleum industry. The president promptly authorized the U.S. Environmental Protection Agency to waive rules that require certain additives to meet clean air standards.
Mr. Bush also called for a temporary halt on contributions to the nation’s strategic oil reserve which, like the removal of additives, would speed the delivery of gasoline to the market. Increasing supply, the president predicted, would lead to a reduction or at least slow the rate of increase in the retail price of gasoline.
While the president focused on supply, his Democratic critics focused on price. Seizing on the record profits reported recently by the petroleum industry, they demanded an investigation into price manipulation by the oil companies a probe the president half-heartedly endorsed.
But recognizing that a time-consuming investigation isn’t going to provide immediate relief to angry motorists, the Democrats also called for a temporary suspension of the 18-cent-a-gallon federal tax on gasoline. New Jersey’s own newly appointed senator, Robert Menendez, is the lead sponsor of this "tax holiday" scheme, and he accused both the oil industry and the Bush administration of making such a drastic step necessary.
"It’s crystal clear that the current spike in gas prices is at least partly due to an act of greed greed that has been enabled, abetted, even encouraged, I would say, by this administration," Sen. Menendez declared.
So the Democrats are busy pointing fingers of blame at the Republicans for letting gasoline prices skyrocket. And the Republicans are busy trying to glut the market with fresh supplies to bring those prices down. But missing entirely from the mad scramble to win the hearts and minds of America’s motoring public is the critical third component of this economic equation:
Demand.
Nowhere, it seems, do any of the outspoken members of both parties see any role that reducing demand might play in affecting both the supply and the price of gasoline. Oh, they’ll pay lip service to developing alternative fuels (which, rather than reducing demand, would merely shift it from one product to another), and they’ll keep offering modest tax incentives for people to buy hybrid vehicles. But beyond that, nobody appears willing to confront the plain truth: We are a nation of energy gluttons.
When President Bush acknowledged in his State of the Union address that Americans are "addicted" to oil, he left out one important adjective; we are, in fact, addicted to cheap oil. For more than three decades, since the first Arab oil embargo hit our gas pumps in 1973, many economists have warned that the price of petroleum products in the United States has not reflected their true cost, that gasoline prices in particular have been kept artificially low to spur demand. Thus, we have become a nation of gas-guzzlers in a world that otherwise treats oil as a precious commodity. The vision of Americans seething with anger over paying $3 a gallon for gasoline is greeted with derision by Europeans, who routinely pay twice as much with most of the revenues going to promote an efficient system of public transportation.
The law of supply and demand is as old as capitalism itself. In the intensely capitalistic world of oil, we ignore one component of this age-old law at our own, increasingly obvious peril.