Peter King Has Lost It

Yes, I realize I'm poaching all over Gabe's turf with this, but it could be next week before he gets around to writing again, so here we go.  From Kings' MMQB:

Rant of the Week: I paid $62 to fill my 18-gallon tank with gas on Thursday in New Jersey. With $4-a-gallon gas around the corner (I hear it's already here for premium in California), I have only one question: Where's the outrage? Why are our elected officials doing nothing -- nothing that any of us can see -- about it? I can afford gas, but how about the people who cannot? I can't believe we just let things like this happen in our society.

Let's take this apart sequentially.  Now, my guess is that Mr. King is one of those people who thinks high gas prices can be traced directly to the war in Iraq.  That's not it.  Most of what we in the United States see as the increasing price of oil is actually the declining worth of the dollar.  Debase the currency long enough -- in our case, for the last 4+ years -- and sooner or later people aren't going to be so happy about cashing your checks. 

So if you want to bring down oil prices, stop the run on the dollar.  (Which means maybe stop cutting interest rates so fast, dudes.)

As for the second part, what does Mr. King propose our elected officials do?  We already sent Cheney to go beg OPEC to produce more oil.  That didn't work.  Should we be looking at price controls?  Tapping the strategic oil reserve during an election year to suppress prices and keep people happy?  (Who would ever suggest that...)

Of course, it's the last part that's really maddening.  Yes, high gas prices do suck.  They suck especially for industries like trucking and air travel. 

But gas prices aren't that high.  Check out this chart that shows real (not nominal, meaning they factor in inflation) gas prices for the last 90 or so years.  Yes, gasoline is more expensive than it has been recently.  But we're not looking at some crazy, never-seen-before peak. 

And as for the people who "cannot" afford gas?

How do they afford cars?

Comments

[Andrew]

"And as for the people who "cannot" afford gas? How do they afford cars?"

My dad lived next door to a guy like this in the 1950's. Somehow he scrapped together and bought himself a new car. But even back then, gas was so expensive FOR HIM that for a number of years his main use of the car was to bring it out of the garage on Sundays to show off in his driveway.

Seriously.

Anyway, if you want cheap gas, pay with gold.

1970 - Gold ~$36.00 per ounce, Oil ~$3.60 per barrel.

2001 - Gold ~$250-300 per ounce, Oil - ~$25-30 per barrel.

2008 - Gold ~$1000 per ounce, Oil - ~$100 per barrel.

In other words, 1 ounce of gold steadily buys about 10 gallons of oil, ignoring the occasional price shocks in both commodities.

The run-up in oil prices since 1971 are a direct result of President Nixon loosening the mooring of the dollar to gold and silver.

[Tom G, ballssticksstuff.com]

I'm outraged at the price of gas too! Now, excuse me while I drink my $3.50/cup of coffee from Starbucks...

[which is very tough to drink given the tongue firmly implanted in my cheek]

[Anonymous Hippie]

How about alternative fuels? If we reduce the demand for oil, can't we assume that the price will go down?

As is, we're set to run out of *cheap, easily refinable* oil in the next 40 years. Why not start making the transition now and avoid a global depression when the new first world's (China, India, etc.) rising demand for oil overcomes the world's ability to produce it.

Interesting site...http://www.lifeaftertheoilcrash.net/

It's got a lot of conspiracy theory stuff, but there are a lot of facts in there. Bottom line is that we need to do something other than get more oil.

For once, I support King...and I read this blog twice daily!

[Me]

Anonymous Hippie, you of all people should be supporting more expensive gasoline. The best way to encourage the development of alternative fuels is by making traditional fuel sources more expensive. Why buy a hybrid if gas is cheaper than bottled water? Why build a solar plant when you can burn coal and produce energy many times more cheaply?

Internalize the external costs of traditional energy (i.e., by taxing CO2 emissions) and suddenly you're a lot closer to cost parity between clean and dirty fuels.

If King has his way, your revolution will only be delayed :-)

[pigletmc]

I don't think I have ever agreed with King about anything until now…. Amazing.

As for the points on the post, I must disagree with some of the reasoning. While the price determinations at the pump are complicated, to take on your two assertions that:

A: The Iraq war had nothing to do with the price of oil: Name a greater force on market uncertainty then the war? Funny that Ronald Bailey didn’t even mention it when he talked about geopolitical uncertainty…. Let alone the saber rattling towards Iran.

B: The deflating dollar is strong culprit: This is a good point. However, in a way, this can also be loosely related to the war in Iraq because of the COST of the war. Remember, the value of the dollar is also speculative. When you pay for the war by borrowing money (nearly $750 billion in hard cash, $12 billion a month with no end in site, plus long term interest) the dollar suffers.

Again, the pricing behind a barrel of oil (as well as the price at the pump) is very complicated and are influenced by a wide variety of economic factors.

Personally, I drive a hybrid so I want the gas to be as expensive as possible. Higher prices will lead to fewer cars on the road that require an 18 gallon tank (like King’s – even when I agree with him he is still a jerk). However, King makes a valid point that poor people suffer the most. Just because someone can buy a car (should they walk to work?) doesn’t mean that someone on a fixed income won’t be disproportionately hurt by the price of gas.

[Me]

Seems like a good time to close this post to comments before this becomes a political blog...