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Thursday, March 24, 2011

Why Gas Prices are High

From one of my favorite writers, David Roberts at Grist:
Into this fog last week came a beam of light in the form of an extraordinary speech from Sen. Jeff Bingaman (D-N.M.), which didn't get the attention it deserved. Bingaman is not normally a talky guy. He's not a McCain or Lieberman, on Sunday talk shows so often they keep toothbrushes in the green room bathrooms. Nor is he given to grand political gestures. He's cautious by temperament (to a fault, I'd argue). Despite his reticence, though, he is among the very few senators who actually understand energy.

Apparently, he finally had enough of the overheated, unmoored ideological fantasies that pass for public discussion of gas prices. So he dropped some knowledge.

First, he explained that the price of gas follows the price of oil. Then he explained that the price of oil is set on the global market. It is largely unaffected by domestic policies like EPA carbon restrictions and Gulf oil permitting. It is only barely affected, and only at the margins, by U.S. supply, which flows from just 2 percent of the world's reserves. (After all, U.S. production has been rising even as oil prices rise too.) The price of oil is shaped by supply constraints in petrostates, demand growth in developing countries, OPEC policy, and unrest in the Middle East. None of those, you'll note, take place in America.

What follows is an inescapable conclusion (my emphasis):
But what can Congress do to help ease the burden of high prices for U.S. consumers, when oil prices are determined mostly outside our borders? I think a realistic, responsible answer has to be focused on becoming less vulnerable to oil price changes over the medium- and long-term. And we become less vulnerable by using less oil.
That's it. That's the crux of the matter. If we want to solve our problems with oil, we have to use less of it. That simple truth is what centrist Democrats generally refuse to tell their constituents.

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