Thursday, October 18, 2012

A Debate Question, Answered

QUESTION: Your energy secretary, Steven Chu, has now been on record three times stating it's not policy of his department to help lower gas prices. Do you agree with Secretary Chu that this is not the job of the Energy Department?

This was a question from the second Presidential debate, and as you may have noticed both candidates dodged it and talked about their own energy policies. But I think this question was answerable, and an answer would have advanced public debate. In particular, it would have dried up a couple of perennial Republican talking points.

"The main thing that determines gasoline prices is the world price of oil. We're a part of the world oil market. The oil that we produce doesn't remain in a separate pot marked "American oil;" it goes into world oil supply, and the oil that we consume comes out of world oil supply. So the question you're asking could be asked as: what can Secretary Chu do to reduce world oil prices? 

"The answer, unfortunately, is not very much. If supply increases, then the price will go down. So world oil prices will go down, somewhat,  if we produce more. However, oil prices will also go down if Norway or Saudi Arabia produces more. Similarly, if demand decreases, the price will go down, so we can lower the price, somewhat, by using less energy. But again, oil prices will also go down if other countries use less energy.

"The best way that we can insulate ourselves from higher gasoline prices is to make gasoline a smaller part of our budgets. Back when people were getting around by horse, a big increase in the price of oats would have really hurt the economy. Now most people wouldn't notice. As more fuel-efficient cars get on the road, the price of gasoline will be less and less important.

"So I would say Secretary Chu's job is not to lower gas prices, which he can't do very much about; it's to help us get to a future where gas prices are not so important. And he's doing a good job of that."


  1. And if I were Gov. Romney, I would rebut by saying “That’s not true, Mr. President.” Gas prices not only tend to be lower in net exporting than in importing countries, but they also vary by as much as a dollar a gallon regionally across the U.S.. The reasons range from local taxes and fees to transportation costs, from gas station insurance to regulations on self-service, from competition to credit card costs. All of these factors can be (and are) influenced by the government, or the government could offset the pain with a tax deduction for commuting expenses.

    A more important question is whether the government should attempt to lower gas prices. Personally, I think those prices should be substantially raised by increased taxes. Most people make individual choices based on gas prices: Where to live, where to work, what kind of car to drive, whether to carpool and, indirectly, what products to buy. Municipalities make similar choices with respect to public transportation, parking, and road improvements. Retailers make choices about local vs. distant sources of goods. Higher gas prices could, arguably, lead not only to reduced dependence on foreign oil, but also to cleaner air, fresher produce, healthier meat, lower traffic, safer driving (fewer heavy vehicles), reduced road maintenance costs, improved public transportation, and a revitalized sense of community.

    Social engineering? Yes, whichever path we follow.

    1. That's why I started by saying "The main thing..." Why, to use Romney's example, are gas prices twice as high as they were four years ago? Not because of changes in taxes or transportation costs.

      Yes, we should raise gas taxes. That doesn't mean (except re: global warming) that high prices are good when the extra money is going to Venezuela. In fact, if we had higher gas taxes, there would be less money going to Venezuela.

      I'm not sure why "social engineering" has come to sound so sinister. Basically, it should just mean applied social science.