Thursday, July 21, 2011

Mike Honda and Gas Prices

I found this mailer from Rep. Mike Honda (D-CA) in my mailbox today.  Normally I don't bother to read this stuff, but I happened to see this panel on the back side:

"Mike Honda is Fighting to Lower Gas Prices".  Wow.  There's really only one way that a congressman can lower gas prices, and that's to lower the 70 cents per gallon tax burden - California of course having the highest gas taxes in the nation.

But lowering gas taxes was not on his list of solutions:

  1. Repeal Billions of dollars in tax breaks for Big Oil.
  2. Make it a federal crime to sell gas at an excessive price.
  3. Support "Use It or Lose It".

Not a single one of these things will lower gas prices.  In fact the first and third will obviously raise prices.  The second probably will, too.

  1. Repealing "tax breaks" for Big Oil means raising their costs, which will have to be passed on to consumers.  Theoretically, this might lower your tax bill, but not your gas bill.
  2. Every president for the past 50 years has gone through this silly exercise.  Never a shred of evidence of collusion on gas prices has been found.  Gas prices are the simple output of supply and demand.  But placing an additional burden - in the form of risk that they will be charged in violation of this law - can only raise their costs, which in turn will be passed on to consumers.
  3. If an oil producer is holding leases to drill oil that they are not using, there are probably solid financial reasons for that.  Drilling there is less profitable than some other activity or location.  If you force them to change their allocation of resources, by definition you will raise their costs.  This will be passed on to the consumer in the form of higher gas prices.
You don't need to be a Nobel-prize-winning economist to understand this stuff.  It's basic grade school economics - supply and demand.  Yet, Honda felt so confident in his three non-solutions to the problem of gas prices that he spent taxpayer money to tell me about them.  Is Honda stupid?  Does he think his constituents are stupid?

Or is the whole thing just a farce, where the goal is to just mumble things that people might like in pieces as long as they don't think about how they combine?  Like, "we must lower cavities in children" and "children need more candy because they like it", or "oil is too expensive" and "let's go to war over it".

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