Tags: Cost | Rising | Gasoline | Prices

The True Cost of Rising Gasoline Prices

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Tuesday, 20 Mar 2012 10:25 AM Current | Bio | Archive

It’s an election year. The economy is weak. It’s déjà vu all over again, especially at the gas pump. In some parts of the country, gasoline prices are at an all-time high.

Sure, we’re talking small sums. An extra $10 per trip to the gas station may only add up to $500 per year per driver on average.

But, we all know the simple reality that money isn’t infinite. If we pay more at the gas pump, there isn’t as much to spend elsewhere. Instead of going out to a nice restaurant once a week, we opt for a cheaper meal elsewhere. We go out less, combine trips, and take “staycations.”

If gas prices were rising but unemployment was low and wages were increasing, it’d be no big deal. Rising prices would simply reflect the rising demand of a growing economy. Today, however, rising gas prices fit in perfectly with other policies designed to increase the role of the state. That’s the true cost of high gas prices.

How do you create a nation of government dependents? First, expand the usage of government programs. It doesn’t matter if it’s designed for lower-income members, such as food stamps, or through middle-class benefits such as housing interest deductions. Once someone starts getting a benefit, whether directly or indirectly, lobbyists will spring forth to protect it.

Second, you cut off the ability of the free-market system to thrive. One way is through more regulation, like a confusing and expensive healthcare plan. Or, simply propose substantial regulation. Either way, you’ll sow confusion and encourage investors and corporations to defer investment opportunities and stick with cash instead.

It also helps if you keep interest rates below the rate of inflation, so that staying financially defensive will be a guaranteed loss. You’re damned if you take the risk, and damned if you don’t.

Be sure to distort market signals by throwing government money at companies that fit your political beliefs, even if they end up going bankrupt while paying bonuses to executives.

Lastly, do whatever is in your power to distort market signals. Threatening to dump oil from the strategic petroleum reserve onto markets is a way to cause a short-term distortion. Actually going through with it is worse—not only will price changes prove temporary, it truly leaves America at risk in the event of a genuine shock.

Record high gas prices are a signal. Yes, consumption has declined in the US, partly due to fewer Americans commuting to jobs. Another part is technological: Our national fuel economy is improving. These are important trends. But today’s record high prices reflect the scarcity of oil, rising global demand, and uncertainty thanks to saber-rattling over Iran.

But there’s an opportunity to increase people’s dependency on the government and assault free enterprise. That’s the economic plan in the White House playbook.

The real cost of rising gas prices goes far beyond some pain at the pump.

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2012-25-20
Tuesday, 20 Mar 2012 10:25 AM
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