What to do about the price of gasoline?
One action President Bush should have taken (and could still take) is to end the 54-cent-a-gallon tariff on imported ethanol (which basically means Brazilian ethanol.) Why the U.S. government should protect the already heavily subsidized ethanol industry at the expense of American consumers is hard to fathom.Update: one thing Larry didn't mention is that President Bush directed the EPA to wave "clean air" rules, by which the EPA requires certain states to use only specific blends of gasoline. Believe it or not, there are 42 different blends (maybe even more now!), so if gasoline supplies run low in a state that is heavily restricted by the EPA, it often can't just buy gasoline from an adjacent state. Sometimes it must come from two or more states away, which makes the gasoline unnecessarily expensive. Bush said "Every little bit helps" regarding the effect on gasoline prices, and even this good start had a little downward pressure.
Energy Secretary Sam Bodman actually defended the tariff earlier this month saying it was necessary so that foreign producers "can have no advantage over American companies." Holy smokes, this is the energy version of steel tariffs and it's just as bad an idea.
But all this talk of price gouging is nothing more than the usual political pabulum.
However, Bush called for increasing tax breaks for hybrids cars, which I have exposed as "The bad way to cut taxes." As I explained, cutting taxes must be uniform, not just for specific industries or products. Otherwise, like in the case of hybrids or anything else we can get "tax credits" for, it's merely favoritism -- a subsidy. By nature, a subsidy is how the government skews the market in favor of special interests.
Larry had previously assailed the ridiculous ethanol subsidies here, concluding, "The administration is being hoisted on its own ethanol petard." And he is correct. The blame for gasoline prices is not just from the price of oil, but the pile of crap known as the 2005 energy bill. In a couple of decades, economists might just look back on the energy bill and its effects like we today look back on the 1970s wage and price controls: "Who were the schmucks that didn't think about ethanol's scarcity, or even that its price would go up from demand, yet mandated a sudden spike in its use?"
But in our midst are interventionists in the guise of free-marketers, who have a form of laissez-faire but deny the power thereof. As I explained several ways in that link, there is no, NO justification whatsoever for ethanol subsidies. Any subsidy takes money from some to give to others, and though the latter can then sell their goods for less, at best it's all the same for the consumer. If an item would normally sell for $2, but a $1 subsidy allows it to sell for $1, then the taxpayer still pays $2 total, for who else pays the subsidy? Then it gets worse, because an equivalent item that might sell for $1.50 will never come to market. The uncompetitive sellers stay in business, at the expense of the consumer and his lost 50 cents.
Now, I also oppose subsidies for oil companies. I'm the first to support the elimination of all subsidies for everyone, believing that that is the level playing field on which they compete for the consumer's business. But to be fair, "Big Oil" hardly receives the boost that ethanol producers and corn growers are. The energy bill boosted their subsidies, and the mandate to phase out MTBE was the hidden windfall for them. When I tried to tell rufus a dozen times that ethanol will rise in price as it becomes more popular, he didn't believe me, but I turned out to be right.
Sadly, President Bush, though I believe he knows better, has bowed to politics and has come out against price gouging, though such a thing is completely mythical. If he didn't, Democrats would score too many points with voters. Republicans have to display some populism, lest anger over gas prices (fueled by mainstream media) give them the same fate as George H.W. Bush. As this Detroit News op-ed says so well, "One thing you can always count on, as soon as the price of a gallon of gasoline nears $3, Democrats will start demagoguing." Link courtesy of our friend Josh Hendrickson. Josh has also noted the interesting correlation between gas prices and Bush's approval ratings, and that if the Republicans finally get smart, they'll bring up ANWR. Drilling in ANWR would immediately cause crude oil prices to drop (because current prices also reflect future supply), but Democrats consistently block all legislation. Especially now, I cannot fathom why Republicans don't drive this point home.
At the present time, our only option is for the lesser of two evils. I, for one, would rather have Republicans half-heartedly screwing up the economy than Democrats completely wrecking things with "windfall profits" taxes. That reminds me: when will Democrats start calling for "windfall profits" taxes on ethanol producers, who are now earning larger and larger margins? Or do they not want to risk that the American people will finally realize that it's absurd for government to support business, and that it's this absurdity that makes things more expensive than they ought to be? Unlike liberals' use of "ought," my use there means "if the blasted government didn't stick its nose in, whether it's trying to 'help' or simply redistribute money to supporters."
People want government to "do something" about gasoline prices, when in fact the federal government shoulders a good part of the blame. People also wanted government to "do something" about the Great Depression, too, though the Federal Reserve triggered it, and the federal government prolonged it. Why look for solutions from the people who created the problem in the first place?