I recently received an email that stated the following:
White House Wants to Keep Gas Prices High With the national average of gas prices hitting $3.65 a gallon, nearing $6 in some parts of the country, and poised to head even higher, America’s families are wondering when the bleeding at the pump will stop. But for Secretary of Energy Stephen Chu, those steep prices aren’t even a concern. In fact, he says his goal is not to get the price of gasoline to go down.
Chu delivered those stunning remarks in testimony before Congress yesterday. When Rep. Alan Nunnelee (R-Miss.) asked Chu whether it’s his “overall goal to get our price” of gasoline lower, Chu said, “No, the overall goal is to decrease our dependency on oil, to build and strengthen our economy.”
As shocking as his remarks are, they shouldn’t come as a surprise. Chu has a long record of advocating for higher gas prices. In 2008, he stated, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe.” (We ask: WHY? WHY should U.S. prices be level with Europe, unless they are pandering to oil companies to increase THEIR profits, and so the government brings in more tax money?!) Last March, he reiterated his point in an interview with Fox News’ Chris Wallace, noting that his focus is to ease the pain felt by his energy policies by forcing automakers to make more fuel-efficient automobiles. “What I’m doing since I became Secretary of Energy has been quite clear. What I have been doing is developing methods to take the pain out of high gas prices.”
The premise of this email is based on a failure to understand economics, and short sighted analysis that only looks at the sound bites on the surface of a complex issue. It is so short-sighted that it is completely wrong. Oil is already subsidized far more than any alternative… here is how it works.
Oil, is like junk food. Cheap, does its job, but not healthy. You could eat all your meals at McDonalds, and live on $10/day. Your blood pressure might go up, your energy down, and perhaps you would get a disease that would cost hundreds of thousands to treat. If you didn’t have health insurance, the American people would foot the bill for treatment – or let you die.
Much of the cost of junk food, like oil, are in the externalities. Factory farms use chemical farming that pollutes waterways that the collective WE need to clean up. The poor health of citizens resulting in loss of productivity in business, and higher medical costs, some of which ends up borne by US. Right now, like big oil, corn, soy and other products are subsidized – so we are subsidizing and therefore lowering the cost of junk food – and oil.
If costs were allowed to follow the free market, and perhaps even taxed to reflect their actual cost including externalities (now we spread that cost around) then perhaps more healthful food would be the same price as junk food.
Apply that to oil (refined as gasoline). The refineries create air pollution that increase health costs and kills people. Fracking, now, all the vogue, may be causing earthquakes and poisoning ground water, again sickening and perhaps even killing people. We, through the government, have spent trillions in the Middle east, over decades, keeping shipping channels open, supporting puppet regimes, establishing military bases, and the sum of this (and other causes, I am sure) facilitated the radicalization of Muslims, mid-east wars and so on. We pay for all of these things in our taxes, and in the intangibles of fear and strife in our world that washes up on our shores. We also pay for subsidies to oil companies.
In exchange we get lower oil prices than the rest of the world.
The number one export from the US right now is… refined oil. More oil is being pulled from the ground right now per year than than in the Bush years. It is as much a mistake to think that the price of gas in the US is based on how much oil we happen to refine on and offshore of our country as it is to think that our wages have nothing to do with economics in China. We do not own the oil and gas that that fracking project might be pulling up from the backyard of the property next to yours. But we live with the consequences.
It is speculation by billionaire hedge funds and the like and world markets that, in the end, control the price of oil.
To get back to the point, if gas prices were to rise to the level they should to cover their actual costs, we would directly see the cost of using petroleum products every time we filled up our tanks. We would be chomping at the bit, as we should be, for the expansion of alternative energy sources to replace the overpriced oil that we currently underpay for.