N.E.W. Libertarian

Promoting clean, honest, open, and limited government in North East Wisconsin

Tuesday, May 16, 2006

Will Political Pandering at the Pump Have Any Effect on Gas Prices?

Lasee’s Notes

With the average price of gas in Wisconsin creeping closer to $3.00 a gallon and summer coming, politicians are scrambling to appear to do something to help lower the pinch at the pump for motorists. Unfortunately most of the proposals being offered are long on rhetoric and short on real solutions.

Governor Doyle was one of the first politicians out of the gate. At the end of April, he teamed up with 15 other governors and sent a letter to President Bush demanding that he cap oil company profits and repeal government subsidies to the oil industry.

Last week Governor Doyle took his plan to the people. He joined forces with Michigan’s governor in creating an online petition where people can add their name to a list calling for Congress and the President to once again cap oil company profits and rollback incentives for oil producers.

News flash for Governor Doyle - the idea of capping oil company profits is not new. Frustrated by the constant fluctuation in gas prices, in 2005 the Democrat controlled Hawaiian Legislature passed a wholesale cap on gas to reduce prices at the pump.

The theory behind the plan – which received national recognition for sticking it to the oil companies – was to force Hawaii’s two refineries to set their wholesale prices comparable to mainland rates.

Supporters of the cap – mostly democrat – were convinced that capping the wholesale profits on island gas would reduce the sting at the pump for Hawaii’s drivers.

Opponents of the law – led by the Republican Governor – said gas prices would rise because oil suppliers would opt to take their product to other markets where they could maximize their profit – this caused shortages in the island’s gas supply and prices to rise.

Two weeks ago, following massive outrage from island residents after the price for regular topped $3.38, Governor Linda Lingle signed a suspension of the gas profit cap only seven months after it was enacted.

The cap didn’t lower gas prices. It actually led to an increase in the price at the pump for regular Hawaiians. It made gas less plentiful and more expensive. It was just a great idea. An analysis by the Hawaiian Department of Business, Economic Development, and Tourism estimated that motorists paid nearly $55 million more for their gas under the price cap than they would have had to without it.

Democratic Senator Will Espero – a leading advocate of the gas cap – summed up the lack of thinking on the left’s part before imposing the cap when he said, “this issue is a complicated and complex matter that doesn’t have an easy, simple solution.” No kidding. He was wrong here as well. The real solution: long term increased efficient use of our oil resource, increased use of cost effective alternatives, increased development of supply and increased domestic refinery capacity.

There is little wonder as to why gas prices continue to rise. Basic economics of supply and demand tells us that oil and gas capacity is a limited resource and as the global demand for it has increased so has the price. And there is no legislation or political stunt that will alter this fact. Read Hayek’s Road to Serfdom, it is a short easy read and it will increase your understanding of our semi capitalist system.

Liberals – like Governor Doyle and the Hawaiian Legislature – just don’t understand that there is very little our state government can do to influence supply of a global commodity like oil. (Hey, why aren’t we drilling for oil under the Great Lakes? - That’s right, its illegal.) Market forces around the world influence the price of oil and there is very little that any government can do to change that for the better. There are a lot of things governments can and do to drive up the price by requiring special blends and mandates for business practices. Markets do work, just watch gas prices.


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Lasee’s Notes is a weekly column by Representative Frank Lasee, 2nd Assembly District, covering events in the Legislature and statewide.

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