Wednesday, July 16, 2008

Good. I think Bernanke (Ben Bernanke, Chief of the Federal Reserve) is right on the money here in explaining why speculation (basically trading on what you think the future price of oil will be, which drives up prices in reality too) is not necessarily pure evil and insisting that energy prices are fundamentally about supply, demand, and the growth of the world economy. Other solutions--get rid of speculators, drill off Florida, gas tax holiday--are either demonstrably unhelpful or dealing with symptoms rather than cause. It goes like this:

-Gas tax holiday: remove the federal gas tax for the summer. All that happens is that since it's cheaper, people buy a little more gas, and the actual monetary benefits go straight to oil companies. It's a temporary non-fix and it helps consumers not at all.
-Drill off Florida: oil companies already have acres upon acres of of land they're not using and even if they did drill off Florida the (miniscule) price benefits--we're talking like maybe a few cents' difference--wouldn't show up for years anyway.
-Crack down on speculation: oil speculators can do what they do precisely because demand for oil is so inelastic--which is to say, people don't change how much gas they buy that much based on price variation--which is a consequence of how dependent our society is on oil. We could stop speculation and oil might get cheaper, but sooner or later we'd be back at square one and antarctica would be completely gone this time around.

No comments:

Post a Comment