Tough Decisions on Gasoline Prices

By Daily Editorials

April 10, 2012 3 min read

Motorists, start your tempers — almost $4 a gallon for the Easter weekend holiday.

Based on the latest forecasts, this benchmark is truly only the beginning. Prices at the pump will be on the rise over the next couple of months as the summer driving season kicks into gear.

Needless to say, gas prices have become a hot campaign issue. A recent Gallup poll found that 85 percent of Americans believe the president and Congress should take immediate action "to try to control the rising price of gas."

That's not so easily done and not really a good idea. Government maneuvers to drive down oil prices in the short run usually don't have a sustained impact. They undermine the free market and, at best, provide temporary political cover.

Nevertheless, the U.S. and Britain have discussed cooperating in a release of strategic oil reserves if fuel prices threaten their fragile economies. Democratic lawmakers on Capitol Hill have been pressuring federal regulators to impose stricter limits on the speculative trading of energy futures.

Today's high oil prices aren't necessarily the result of excessive speculation. They reflect the reality of the marketplace as it currently exists. It doesn't help that oil is priced globally in terms of the U.S. dollar — which is weak.

Supply is constrained by the limited infrastructure for refining and delivering fuel. Demand is rising along with economic growth around the world. Sanctions against Iran, the world's third-largest oil exporter, have pushed up prices based on a fear that Iran could provoke a confrontation that sends oil prices soaring well beyond current levels.

Those are the fundamentals, and no president or Congress can pass a law changing them between now and Election Day on Nov. 6 — the market should be allowed to take its course.

Still, high prices at the pump hurt U.S. households and put a drag on the economy. No other commodity has a bigger impact than oil. High fuel costs are the equivalent of a tax on practically all economic activity.

By one key measure of supply and demand, we're heading in the right direction: The U.S. has reduced imports from the Organization of Petroleum Exporting Countries by more than 20 percent over the past three years. In large part, that's because we're producing more domestic oil and natural gas and getting more efficient in our fuel consumption. (It is also, alas, partly because of a slow economy.)

That reduction in reliance on foreign oil is small comfort to motorists who see $5 gas in their future. But sustaining a drive toward efficiency and production will do more for the U.S. in the long term than any reactive steps in the coming weeks. After all, the Elon poll also found that people blame bad driving habits for high fuel costs, too.

That's a problem we can all do something about.

REPRINTED FROM THE JACKSONVILLE DAILY NEWS

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