4/25/2006

Reactions to what Politicians want to do on Gas

My notes: 1) there is a world market for oil. Not making purchases from the national oil reserves which is a good thing because the markets have a better incentive to figure out how much oil to store for emergencies, but these purchases are such a small percentage of total worldwide sales it will have no observable impact on prices. 2) This discussion on price gouging is of course very sad. We had a FTC report just the end of last year on this question. But more importantly, the changes in prices seem to be explained just by the changing world price of oil. 3) Government regulation might in theory make things work better, but the hysterical reaction to these oil issues show how politics makes regulations likely to cause more troubles than they could possibly solve. Finally, on something like price regulations, it seems hard even in a theoretical sense to see how the government is better at picking the right price.

With gas prices on the rise, President Bush on Tuesday offered suggestions for reducing oil costs, including increasing refinery capacity and conservation, to diversify away from oil through the use of alternative fuels like ethanol.

Under pressure from lawmakers and the public who have alleged price gouging by oil companies, the president also said he has ordered a probe of price manipulation and market speculation. On Tuesday, he also ordered a temporary halt of deliveries to the Strategic Petroleum Reserve.

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