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Can't the government help with gas prices?

Higher gasoline prices are on most readers minds these days. That has many asking: why isn't the government do anything to keep them from going higher?
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Higher gasoline prices are on most readers minds these days. That has many asking: why isn't the government do anything to keep them from going higher?

Americans living on fixed incomes cannot afford to drive. We need some sort of government help.
          Shirley B. -- St Paris, Ohio

And those who live in states with cold winters face another nasty surprise: home heating bills are expected to rise sharply — after posting big gains last year. Not only have natural gas and heating oil prices posted big gains this summer: long-range weather forecasters say it looks like the winter is going to get off to a colder-than-normal start. If that happens, you'll be buying more fuel at higher prices.

In the short-term, the government can help people who can’t afford higher heating bills. The Low Income Household Energy Assistance Program (LIHEAP) — a federal program administered by county governments and local community organizations — can help. But funding for the program hasn’t kept up with oil prices — which have doubled in the past two years. That means either more money has to be added to the program — or else some people are going to go without heat this winter.

Over the longer term, there are really only two things the government can do to help contain oil prices, and the cost of the fuels made from oil. First, it can encourage oil companies to produce more oil. The second thing it can do is to promote more efficiency and cut the growth in demand.

On that score, our government is batting .500. The Energy Policy Act of 2005 — the "energy bill" that took Congress and the White House four years to produce — provides billions of dollars in tax breaks and subsidies to oil companies to drill more oil. (And it’s not as if the oil companies are hurting for cash at the moment.)

On the demand side of the ledger, the law was a major missed opportunity. When the "oil shocks" of the 1970s sent prices soaring, big gains in efficiency actually reversed the growth in consumption: we made every barrel of oil work a lot harder. As a result, oil prices tanked in the late 1980s. This time, however, Congress failed to impose simple measures like mileage standards on cars to promote energy conservation.

Then, shortly after passing the energy bill, our Congress wrote a check for $286 billion for a transportation bill that had enough pork in it to keep pretty much every state happy. The total tab came to roughly $2 for every gallon of gasoline consumed by American drivers in a year.

Most of the money went to build new highways.

Why does the price of gasoline at the pump jump so quickly when the price of a barrel of oil jumps? …  The gasoline stations have already purchased the gasoline at their tanks at a lower price. Is there some price gouging going on here? Is there anyone from the government looking into this?    
          Larry D.,Charlotte, NC

Lots of readers have asked this question: If the gallon of gasoline in the tanker truck was selling for $2 when it left the refinery, shouldn’t gas stations have to sell it for that price (plus a little profit)? The question certainly sounds simple. But the answer turns out to be a lot more complicated.

First off, you'd have to figure out how to identify the production cost of a specific gallon of gasoline as it flows through the system. You might be able to do this with, say, a bag of potato chips that was stamped with a price tag at the factory. But the gallon of gas you just pumped into your SUV is mixed with a lot of other gallons as it flows through pipelines, rides over the highway in a tanker truck and sloshes around with all those other gallons in the underground storage tank at your local gas station. So the pump price — which can change daily — is set by market demand, not production cost. And when prices change rapidly, there can be big differences. As always, it pays to shop around.

Still, there are people keeping an eye on price gouging: most states have laws on the books to prosecute gougers. In Florida, for example, the state’s Attorney General’s office sent out a reminder against price gouging for gasoline — as well as food, water, hotels, ice, lumber and generators, among other items in demand.

The problem with these laws is that they require the declaration of an emergency before they can be enforced. While the surge in gasoline prices has unquestionably been a disaster for many Americans, so far, no state has declared a “gas price” emergency. 

Hawaii recently imposed wholesale gasoline price caps, but that’s a different strategy. And capping prices has a nasty side effect: it can quickly lead to outright shortages.

Call it the Hurricane Effect. What happens when there’s a big storm coming and everyone rushes to the hardware store for batteries? Demand is sure to overrun supply. Since the hardware store can’t raise prices to slow hoarding (they’d quickly be hauled off to jail for “price gouging”), the store runs out of batteries. So retired senior citizens and others who have all day to shop for batteries get there first and clean out the shelves for $1 a pack. When you get off work, you’re out of luck.

If battery prices were allowed to rise to, say, $5 a pack when supplies got tight, the early bird shoppers might think twice before buying 10 packs. They might realize they can get by on 2 packs, leaving adequate supplies for the rest of us.

In other words, there are only two forms of rationing: letting prices rise or restricting physical delivery. We now have price rationing. If you cap prices, all you’ll do is make it more likely you’ll have outright shortages.

Physical rationing is always a possibility. But anyone who lived through the gas lines of the 1970s — and the frequent road-rage fist fights that ensued after waiting for hours to fill up — would rather avoid that again, if possible.

Besides, who would administer such a rationing program? In the 1970s, there were still “gas station attendants” who pumped the gas. When was the last time someone came out and cleaned your windshield while the tank was filling?

We live in a self-serve nation. There’s no one left to supervise gas rationing. You’d have to all out the National Guard.

Oh, wait a minute. They’re all in Iraq.

If OPEC wants the price of oil to be around $40.00 per barrel why don't they just sell it for that price. At 60 or 70 dollars a barrel they must be getting very very rich... How can they spend all the money they are making off their oil? Is the oil really theirs or should it belong the to all the people of the world?  
          Kit Birmingham, Big Pine, Calif.

The Supreme Court's recently decision notwithstanding, our country has a long history of respecting property rights. If the oil in Saudi Arabia belongs to the people of the world, that sort of gives me the right to move into your basement without paying rent.