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June 27, 2022

Nothing motivates political action more than a "sky is falling" scenario. Take the current surge in inflation generally, and one universally loathed aspect thereof -- the jump in gas prices.

As the public outcry to do something gets louder, politicians increasingly feel compelled to act. Unfortunately, that action typically manifests in one of two ways. First is to propose quick-fix solutions that generate good sound bites but are either Band-aids at best or of questionable merit at worst. Then there's the always popular strategy of blaming someone in the other party for whatever is causing the public consternation of the moment.

What generally doesn't happen is bipartisan collaboration designed to coalesce around an efficacious long-term solution that actually addresses the cause of the problem and serves the public interest.

Take, for instance, the spike in gas prices. As things stand today, the average price of a gallon of regular is at an all-time high both nationally, where it sits at nearly five bucks, and in each of the 50 states. Illinois motorists are paying an average of $5.49 per gallon. Understandably, this has folks upset.

But neither the federal nor any state government really has that much influence over gas prices. Which means the primary political response to the rising price of gasoline has followed the typical pattern of blaming someone in the other party, or offering up short-term solutions that sound good but don't actually address the cause of the problem.

Start with playing the blame game. Republican Congressman Kevin McCarthy of California recently opined that high prices at the pump "aren't Putin's price hikes, they're President Biden's." During his talk earlier this week in Illinois, former Vice President Mike Pence agreed, blaming the high price of gasoline on the policies of the Biden Administration.

Which makes for good sound bites and potentially effective vote pandering in an election year, but ignores reality. Virtually every independent, nonpolitical source attributes the surge in gas prices to three things: the disruption in supply caused by Russia's invasion of Ukraine and the concomitant international sanctions; a spike in domestic gas consumption after the easing of COVID travel and related restrictions, coupled with a simultaneous decrease in production by the major oil companies; and price gouging by those selfsame big oil firms.

Indeed, as more Americans took to the road post COVID restrictions, both domestic and worldwide production of oil by giants like Exxon and Chevron has actually trended down.

The drop in domestic production is particularly curious. In 2020, 13 million barrels of crude were produced at U.S. oil fields. That declined to 11.9 million barrels last year. So despite having the capacity to produce more, oil companies are choosing to produce less, which curtails supply and drives up prices.

Meanwhile, profit levels are reaching historic highs for the oil industry. Which wouldn't be happening if it were just passing along cost increases to consumers.

So if they aren't bumping up production, what are these companies doing with their record profits? Well buying back stock, to make stock prices per share go up.

According to a recent article in the New Yorker, Exxon announced it intends to buy back up to $30 billion of its stock, while Chevron is looking to double its buyback of stock from $5 billion to $10 billion.

To be clear, the U.S. government didn't start the war in Ukraine, didn't force the oil industry to cut production and didn't pass any initiative requiring price gouging.

Nonetheless, the pressure is on President Biden to do something about the price of gas. The one gas-related cost factor the public sector does control is taxes. Hence, President Biden recently announced he is considering a federal gas-tax holiday. This will save an average of about 18.4 cents per gallon, or roughly 3.7 percent.

Never mind that some or all of this tax relief won't make it down to consumers, or that such an initiative does not address the actual causes of the spike in gas prices. Or even that the revenue collected from the gas tax goes to building and maintaining the highways -- cutting taxes sounds good and will appeal to voters, at least until they lose a wheel to a pothole.

Source: Daily Herald