Price of gasoline important to US policy (sometimes)

Sept. 19, 2014
The price of gasoline is important in the making of US energy policy—except when it is not.

The price of gasoline is important in the making of US energy policy—except when it is not.

It seems important when the proposition under discussion would increase domestic production of crude oil. It seems much less so when the proposal relates to air quality.

In the low-key controversy over the export of crude oil, the price of gasoline is pivotal.

Ending the statutory export prohibition would relieve regional bottlenecks now depressing domestic crude values. The bottlenecks result from growth in US production that Congress couldn’t have foreseen when it enacted the ban nearly 40 years ago. Exports would remove the distortion.

Opposition to ending the export ban comes from refiners profiting from the unsustainable status quo and from extremists and their political friends who resist anything good for oil supply. Everyone else in the US would benefit if the ban were ended. That includes consumers, who always fare best when markets work with least encumbrance.

But Congress won’t act. Opponents of ending the export ban warn of higher gasoline prices. Elections loom.

In fact, good reasons exist to believe exporting crude would moderate gasoline prices. But unsupportable claims to the contrary are enough to make the issue untouchable.

By contrast, concern about the price of gasoline exerts little influence over clean-air regulation. Part of the explanation for that is consistent low-balling of estimated costs by the principal regulator, the Environmental Protection Agency.

Over the past several decades, environmental regulation has steadily increased the costs of making gasoline and other fuels. While the strongest influence on gasoline prices remains the price of crude, manufacturing costs set levels below which product prices can’t stay for long. Those levels have risen. They’ve risen greatly.

Without question, regulation has improved air quality. But the improvement comes at a price that shouldn’t be ignored, especially when EPA proposes new regulations of doubtful need.

Americans are characteristically hypersensitive about the price of gasoline. They need better understanding about the causes of their periodic distress.

(From the subscription area of www.ogj.com, posted Sept. 19, 2014; author’s e-mail: [email protected])