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Our old friend, “pain at the pump,” is with us once again, and this time it promises to be far more painful than the last time around. “Pain at the pump” is a nice little catchphrase, but I’ve never been able to figure out why people pick on gas. After all, isn’t it just as painful to pay $250,000 for a house that used to cost $8,000? Or $30,000 for a car that once cost $2,000? And what about the skyrocketing prices of such basic foods as milk, bread and eggs?
The fact is that the price of gasoline is relative. Relative to what Americans have been used to paying, $4-$5 a gallon sounds like a lot. And $6-$7 a gallon – which is almost certain to come – is going to sound like a lot more. But relative to what countries such as the U.K., France and the Netherlands have been paying for years, these prices are no big deal.
But what, exactly, drives up gas prices? Some of the major factors include:
Supply. So long as “environmentalists” have their way, our lack of accessible domestic supply assures that gas prices will continue to rise. The far left, intent on bringing about a green-energy society, cheers on Richard Nixon’s creation, the Environmental Protection Agency, as it continues to stifle oil production at every turn. Obama’s refusal to OK the Keystone Pipeline is just the latest example of how committed the green crowd is to bringing oil production to a standstill.
Demand. The emergence of China and India as economic superpowers, not to mention smaller emerging economic powers such as Chile and Brazil, assures continued upward pressure on energy prices, even if the growth of these economies slows in the coming years.
Middle East tensions. Summed up in one word: Iran.
Currency devaluation. Above all, the Federal Reserve continues to quietly increase the money supply, which puts unrelenting downward pressure on the U.S. dollar. What makes the continual devaluation of the dollar a unique factor is that it creates the illusion that gas prices are rising.
Futures market. Speculators take all of the above factors, and more, into consideration and bet on the future price of oil – the usual result of which is to drive prices still higher.
Of course, there are other factors that play into the equation as well, such as the 18.4 cents per gallon federal excise tax, but the biggest drivers of high gas prices are the five I’ve listed above.
Even so, there is an even bigger reason why gas prices are sure to rise dramatically in the future: the coming “excess-profits tax.” In less gentle terms, I’m talking about increased government confiscation of oil-company profits. This theft will cause oil companies to pull in their horns and put the brakes not only on oil drilling, but on research for alternative sources of energy as well.
The class-warfare folks in the nation’s capital have a slam dunk when it comes to demonizing the major oil companies. They conveniently ignore the fact that the five largest oil companies – Chevron, Shell, BP, ExxonMobil and ConocoPhillips – make a bit over 6 percent profit on sales, or about one-fourth the profit margin Google enjoys. That being the case, one wonders why the kleptomaniacs in Washington don’t slap Google with an excess-profits tax.
Of course, some would argue that people don’t need Google, but they do need gas. Need, however, is a subjective term. It is simply a euphemism for want. Everyone claims to need gas, which simply means they want it. They also want to pay less for gas – and less for cars, food, housing, medical care, and baseball, football and basketball tickets. Worse, pandering politicians have convinced them that not only are their desires needs, but their needs are “rights.” Presto: Just like that, inexpensive gas becomes a right.
Let’s face it, if you’re on a tight budget, which most people are, paying anything for anything is painful. But so long as people continue to buy an item, regardless of what that item may be, it is proof positive that the so-called pain experienced in paying for it is not great enough for them to make the decision to do without it.
When the history of Western civilization is written, it will be clear to all that it was not Islamic terrorism that brought it down. The culprit will be the perverse, widespread belief that people have a right to anything they happen to desire.
This uncivilized notion assures a continuing inflation of our currency and, as a result, continually increasing prices – including gas prices – no matter what other factors are at play.
It’s too bad that spoiled, uninformed Americans do not understand that higher prices are a direct result of all the “free” stuff they get from government – especially under the label of “entitlement programs.” If all personal and corporate welfare were eliminated and people and corporations were forced to live in accordance with marketplace realities, most prices would decline quickly – and dramatically.
We may have to go through a dictatorship or two to get there, but, hopefully, Americans will ultimately rise up again and get back to more hard work and less free stuff. China is doing it. India is doing it. Vietnam is doing it. And there is no reason that Americans can’t someday do it again.
But that won’t happen until the pain becomes so unbearable that welfare addicts realize that they are no longer getting the best of the redistribution-of-wealth scam. That’s when they might be motivated to push back against the tide of totalitarianism and opt for more freedom in lieu of free stuff. And if that happens, a phrase like “pain at the pump” would be little more than a worn-out anachronism.