All politicians are idiots and other obvious thoughts on high gas prices

I'm angry.  I can't believe we're right back where we were a year ago.  Gas prices are rising and Congress is trying to do something about it.  Eighty-two Democrats and 3 Republicans in the House have proposed the Federal Price Gouging Prevention Act (H.R. 1252) otherwise known as the FPGPA, pronounced STUPID.  So let's take a look at the STUPID price gouging bill...

NOTE: My serious take on the solution is at the end of the post...so if you want to skip my sarcasm, skip to the last paragraph. 

The STUPID price gouging bill will make it a federal crime to:

...sell crude oil, gasoline, natural gas, or petroleum distillates at a price that is unconscionably excessive or indicates the seller is taking unfair advantage [of] unusual market conditions (whether real or perceived) or the circumstances of an emergency to increase prices unreasonably.

Unconscionable excessive?  Unfair advantage? Increase prices unreasonably?  Yikes.

Allow me to interpret.  The STUPID bill makes it a federal crime to:

...sell crude oil, gasoline, natural gas, or petroleum distillates at a price that makes my constituents complain because they are too lazy to drive less at higher gas prices.

There are two possibile explanations for the Democrats proposal of the STUPID bill.  1) They think the public is too stupid realize they are trying to "do something" by proposing a STUPID bill, or 2) They are idiots.  Since Env-Econ readers obviously represent a cross-section of the public, and since Env-Econ readers are smart enough to know that this bill is STUPID, I have to conclude that 1) is logically impossible and therefore, 2) must be true.  So we've now proven that Democrats are idiots.  We're halfway there. 

In looking into the STUPID price gouging bill, I came across the Republican Study Committees reports on the STUPID price gouging bill.  In it, they list a set of alternative proposals for lowering gas prices.  They are:

• Streamline the environmental hurdles to building new oil refineries.
• Make it easier for small refineries to increase capacity.
• Allow more offshore (e.g. Outer Continental Shelf) and inland (e.g. Arctic National Wildlife Refuge) oil drilling.

In other words...screw the environment and roll back new source review.

• Temporarily suspend the gas tax.

...because driving more is always a good short-term solution.

• Temporarily suspend the gas tax and temporarily suspend spending on all transportation earmarks in the most recent surface transportation reauthorization bill.

...because driving more on crappy roads is an even better short term solution.

• Permanently reduce the gas tax.

...because driving more on crappy roads is an even better LONG term solution.

• Waive or repeal gas formulation (e.g. oxygenation) requirements under the Clean Air Act and related regulations.

...because somehow removing solutions to environmental externalities is what everyone wants.

• Encourage private-market projects to recover usable energy from oil shale and to otherwise increase production of renewable/alternative fuel sources.
• Strengthen the existing investment tax credit for Enhanced Oil Recovery (using modern technology improvements to extract oil from previously unavailable sources) in section 43 of the IRS Code.

...because we like free-markets especially the kind that subsidize our buddies.

• Waive the tariff on imported ethanol and waive regulations that limit refined gasoline imports.

...I actually like this one because it removes an inefficient policy.

So the Republican solution is to remove all of the policies that are designed to capture the external costs of driving whcih in turn would increase the social costs of driving.  Hmmmm...lower the individual cost of driving which will actually increase the overall social cost of driving.  Republicans are idiots. 

Since independents don't matter, I conclude my proof.  All politicians are idiots. 

Look, in all seriousness.  High gas prices are NOT an economic or political problem.  They are the result of the natural workings of markets.  There is nothing wrong with the market--and no reason, other than self-preservation and the false appearance of being able to do something, for politicians to intervene.  Supplies are decreasing--both temporarily through unexpected refinery shut-downs and permanently through stock depletion.  Demand is increasing--both in the U.S. and worldwide.  Both of these will cause gas prices to rise and that's good.  If gas prices don't rise, we will consume gas even faster and run out sooner.  Higher gas prices encourage conservation and encourage investment in alternatives.  High gas prices might be uncomfortable while we search for viable long-term solutions, but they're more comfortable than the alternative:  no gas and no solutions.

Comments

[Erik Nordman]

I like this Republican Study Committee Alternative:

"Encourage private-market projects to recover usable energy from oil shale and to otherwise increase production of renewable/alternative fuel sources."

Don't they realize that high gas prices themselves stimulate research into alternative sources, like oil shale and renewables? Lowering the price of gas, even the threat of lowering the price, removes incentives to invest in these alterative energy sources.

[Justin]

Erik: You're very correct. As my father works in the oil industry, I have met geologists and other scientists who tend to be employed only times of high gasoline prices. R&D naturally occurs in times of high prices.

Thanks Tim, this is exactly what I was talking about yesterday (except on the state level) and the Republicans and Democrats traded roles.
If the government imposes what is essentially a price cap, it will harm the oil industry. My only training in economics was Intro. to Macroeconomics. If I can picture this in my head correctly: when there is a price cap, then a shortage will exist. It achieves the opposite intended effect, no?

[odograph]

I think the congressmen lag on this. They react with political instinct, and approach the "gasoline problem" with old special interest politics.

Out here in the world, I think we are closer to a tipping point. I think average folks are closer to accepting efficiency and lifestyle changes - in part due to global warming vibes, but in part from simple practicality.

Choosing efficiency is the one thing we can do, without waiting for anyone/everyone else.

Now, there might be the odd economist who endorses 6-year loans for SUVs ;-), but I really think that is close to "over."

If not, I think next year's prices will seal it.

[John Whitehead]

From the inbox:

Only you guys could pull off calling all politicians idiots in a well reasoned blog post.

[Anonymous student]

Isn't it also kind of STUPID to post articles on a blog during work hours Professor Haab? Aren't students paying for you to help educate them? Last time I checked, you're dishing information out for free on this blog and spending less time with students.

Would you consider this an acceptable answer for our tests if you ask, "what is an example of negative externality and market failure?"

[joshua corning]

Aren't students paying for you to help educate them? Last time I checked, you're dishing information out for free on this blog and spending less time with students.

For free?!?!

Hey when do I get my tax refund for all the money my state and federal governments have spent on secondary education?

[Tim Haab]

Anonymous student:

Ummm...no? My appointment is 55% teaching and 45% research with a land grant inspired agreement to participate in outreach to the community (often called extension). This is my extension and if anything the marginal benefit I receive from the blog is 0. Therefore, you are receiving the benefit of my STUPID posts at zero cost. So you are therefore freeriding. If you are feeling generous and would like to voluntarily contribute to the public good we are providing, you can send donations to us at the addresses on the left.

P.S. While writing most posts I am sitting in my office with my door open (closed if I have the air conditioner on). Feel free to stop by if you would like to benefit from my stupidity in person.

[odograph]

As long as professors don't blog from Aeron chairs, I'm good.

[odograph]

BTW, you could probably bend "tuition costs" into an env-econ argument. Are telecommuting and telecasting options used to maximum student benefit? Would the reduction in student transportation be an ecological win? And of course, would there be wider benefits to society if eduction were less costly and graduates less burdened with debt?

1,000,000 points extra credit if you tackle tuition costs as market failure.

[CWuestefeld]

I agree with your general thesis, and most of your argument. However, there's one here that you've swung at and missed:

> Waive or repeal gas formulation (e.g. oxygenation)
> requirements under the Clean Air Act and related
> regulations.

This is good policy: oxygenation (e.g., MTBE) does increase the price of gas, while at the same time decreasing fuel efficiency. While it's causing these problems, it doesn't do ANYTHING to help reduce emissions, its putative goal. That's because any car made in the last decade and more has O2 sensors and engine control computers that ensure the correct air-fuel mixture. They do a fine job that the blunt (and inefficient and expensive) hammer of oxygenated fuels can't match.

[PaulS]

Tim, I think you might be a touch off target. Politicians are not so much idiots as seekers of power. If Congress causes physical gasoline shortages and lines this year or next - which is where the rhetoric indicates we're headed - then Congress gets the power to boss everyone around by giving or withholding special access to gasoline.

Meanwhile, the fool who is not getting that access may well be cheering from the sidelines provided Congress sustains the illusion that the hated bogeyman "big oil" - rather than the fool, who is the one whose life is mess - is being dumped upon. It's not hard to persuade fools to cut off their noses to spite their faces. Such behavior, writ large, is a big part of how Zimbabwe and other places got to be as they are. In such matters it is never safe to underestimate the character of a lot of politicians, nor to underestimate the profound stupidity of the average person.

The image on this book cover says it all.

[Tim Haab]

CWuestefeld:

Yeah, I missed on that one. I was worked up and didn't think about it enough.

Tim

[closedanger]

Yup Tim. A re-run every decade is now a re-run every year. If the politicians would only shut up about it, the price would fall. Let us not forget that the FED makes more off of petrol products than any corperation.

[BravoZulu]

All politicians ARE idiots. Where were the price gouging laws when housing prices doubled over the last 5-6 years?

(political sarcasm on) Oh, you mean to say that voters might not like having their wealth confiscated? And we may not get re-elected as a result? And the oil companies can't cast ballots? Well this is easy... (sarcasm off)

[gattsuru]

As noted above, oxygenation is an expensive and inefficient hammer that really only provides benefits to very old vehicles, while causing harm in newer ones.

It's also possible to reduce gas taxes without driving on shittier roads. We can take money from taxes that don't apply to the minimum wage worker as harshly as the billionaire, even, if you want to get really energetic about the matter. Drop taxes a little more and move on up the curve, or can the advertising money political candidates get from the government, and we're golden.

[Richard of Oregon]

Most everytime I see a breakdown of who gets the profits from the sale of gasoline, the government(fed, state and local combined) ends up coming out with the biggest share of the booty, yet seldom do I hear people moaning about the oppressive taxation by greedy politicos. Why is this?

[M. Simon]

The people running the oil companies are crooks.

Oil Companies Run By Crooks.

[odograph]

Bicycling Magazine likes this three speed as an urban bike. You might think $699 is a tad much for a three speed ... that maybe they are gouging ... that maybe they are run by crooks ... LOL

As they said on SNL, "Pay me now or pay me late-a!"

[No Oil for Pacifists]

Good post but (along with Erik), I think some Republicans get it. I've cited you in my analysis on a related point.

[Mark]

My sense is that you believe this bill is "stupid."