Many Republicans think of themselves as capitalists. I’m talking about the people who exclaim the virtues of the free market. They expound upon the need for laissez-faire economics. They cry out against government regulation.
Until you mention gas prices.
Then, without hesitation, these same people will complain that gas prices are too high. And in one statement, everything they have claimed about capitalism flies out the door. They think that the government should do something about it.
Sounds kind of socialist to me.
Oil drilling and production in the United States is at its highest in eight years and gas is cheaper than the start of the recession under Bush. We are actually exporting more oil than we are using. The oil companies are making record profits and still getting $4B in tax breaks. If you want to blame someone for high gas prices, why not ask the oil companies how they are making so much money off of you.
Oil is not a finite resource. There is always more oil being made, however, it is believed that it takes millions of years for oil to form. Thus, the more we take out of the earth at a higher rate than the earth can make it, eventually the oil supply will dwindle drastically and we will have to go through more effort to find it and refine it.
However, we Americans are more dependent on oil than any other nation. This is what the current usage of oil looks like today for the top five consumer countries.
As you can see, the United States, which is the third most populated country, uses almost twice as much oil as China and India combined, while the population of China and India is eight times that of the US. As you can imagine, both of these countries are increasing their demand for oil as their population demands the same conveniences we are afforded here in the US. While the demand for oil in the US has actually decreased , in 2001, China was the third largest consumer and India was the seventh. Both China and India are demanding more oil. Another decade and this chart will change again.
That brings us to supply and demand. Capitalism is built on this theory. As supply diminishes and demand rises, prices go up. In a free market, the goal of the company is to make larger and larger profits and keep its shareholders happy with increases in stock price or dividends. So the more demand, the higher the price the companies can charge. Same for dependence. The more you depend on oil, the more companies will charge for it because you can’t quit. This is great for the bottom line of the companies. They can produce less, charge more, and the shareholders rejoice. And capitalism shines.
However, it isn’t that simple because production has kept up with demand. So the laws of supply and demand are being taunted by another evil. Oil Futures.
It seems that we mostly have Wall Street to thank for our higher gas prices. Before the mortgage market tanked, they were already looking for the next big bet, so they started selling oil futures and ran the price of oil up. From How Stuff Works,
As a result of the artificial oil market, the average price per barrel of crude oil increased from $31.61 in July 2004 to $137.11 in July 2008 . The average cost for a gallon of regular unleaded gas in the United States grew from $1.93 to $4.09 over the same period .
If we want our gas prices to go down, then we need more government regulation to curb the oil futures market. The Dodd-Frank Act passed a year and a half ago attempts to do this, however Republicans have continuously tried to kill the act instead of doing something to ensure gas prices decline. But like I’ve said, the Republican party is pro-capitalism and anti-regulation, so there is no reason for them to want gas prices to go down. If gas prices go down, then the oil companies don’t make the big profits. Four of the top ten most profitable companies in the world are oil companies. One is a natural gas company. This is capitalism at its finest.
One of the mantras of the Republican party is, “Drill, baby, drill.” Yet we are now exporting more oil than we import. And gas prices still haven’t gone down due to oil futures, and because our consumption of oil may have decreased, but the demand worldwide has increased. Thus, economically, it makes a lot more sense for us to slow our production, use up the supply of oil from other countries while it is still relatively cheap, and then parcel out the last bit to the world from our reserves slowly and at the highest price possible.
In conclusion, US demand is decreasing, but more populated countries are taking up the slack. Wall Street is still trying to suck the poor people dry by betting on our future. The Republicans want to continue giving four billion of our tax dollars away to the oil companies instead of investing in a replacement source of energy.
I leave you with this quote from President Obama at Nashua Community College in New Hampshire,
Let’s put every single member of Congress on record: You can stand with oil companies, or you can stand with the American people. You can keep subsidizing a fossil fuel that’s been getting taxpayer dollars for a century, or you can place your bets on a clean energy future.