Gas goes up again

Published: Wednesday, May 9, 2007 12:16 a.m. MDT
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Everyone, it seems, talks about the rising cost of gasoline, but nobody does anything about it.

Perhaps this is because there isn't much constructive anyone can do, absent an effective long-term national strategy.

For all the fuming about prices that, last weekend, hit $3.05 a gallon on average in Utah and continue to climb, it is important that lawmakers not depart from common sense. A lot of average folks seem oblivious to basic economic principles, but even when it concerns something that seems as arbitrary as the oil industry, those principles hold true.

Should lawmakers pass windfall taxes on the industry? First, they would have to define what constitutes a windfall versus a respectable profit, bearing in mind that many other businesses in other industries do quite well at consumers' expense. Then, ultimately, they would have to deal with the fact that windfall taxes either would get passed onto consumers or affect the supply of gasoline.

Should lawmakers try to impose price controls? This would interfere directly with supply and demand. Remember the 1970s? Artificial price controls back then resulted in long lines at pumps and shortages. It also kept the nation from aggressively pursuing alternatives that might have taken the nation out of OPEC's grip. Prices rise and fall to regulate demand and to stimulate competition.

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A lot of man-on-the-street interviews in recent days have asked how much consumers would pay before deciding to take a bus or ride a bike instead. The answers have varied, but many people put the ceiling at $4 a gallon or so. And that demonstrates a big part of the problem.

Americans are having to pinch their budgets to pay for gas, but the demand has yet to decline. Until people decide to drive less, expect prices to rise every year when vacation season starts, or when other factors, such as refinery fires or natural disasters, get in the way. Expect to read about oil industry profits.

Unlike many other segments of a free-market economy, gasoline is a necessity. As prices rise, they affect the prices of all goods that must be transported. They cause people to shun suburban homes and move closer to cities and mass-transit lines.

It isn't quite true to say nothing constructive can be done. The ultimate answer lies in a strong national policy geared toward developing alternative fuels and requiring tougher fuel-efficiency standards. So far, however, we haven't seen many presidential candidates pick up that cause.

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