Opinion and Economic Analysis

HICKS: Gas prices likely to influence presidential race

March 3, 2012

I find myself in the odd position of congratulating President Obama in two consecutive columns, but it is his due. Late last month, our president gave what was billed as an important speech about gas prices. It was that and more.

He talked about the need for growth in alternative energy and the limitations of current domestic exploration on short-term prices—and admitted that a sitting president has almost no power over gas prices. It was an astonishing admission from a man who only three years ago declared his electoral victory as the date “the rise of the oceans began to slow.” Live and learn.

The president made this speech because over the coming months we are likely to again feel the sharp pinch of high gasoline prices. If I could perfectly forecast gas prices, I would quite easily be the richest man in the world. I cannot. But I can get close enough to worry that we’ll see gasoline prices in excess of $4.25 by summer (and many economists think that’s optimistic). Unsurprisingly, this will seriously hamper the economic recovery and the president’s re-election efforts.

Most Americans want more alternative energy sources. In most of our lifetimes, that remains a fanciful dream fueling nothing but political rhetoric. The highly touted electric car revolution, if it recovers from the Chevy Volt debacle, is a prime example. Electric cars are not powered by some environmentally benign ether. They run on coal.

The same marketing campaign that has convinced so many sweet young people that electric cars are “clean” also has unleashed a torrent of stupidity in policy advocacy circles. The truth is that if we could increase our legitimately alternative energy output a hundredfold, we’d meet only about 5 percent of our energy needs.

No doubt, some new technology will emerge, permitting us to better store wind and electric power. But if that existed today (and it does not) it would still require three decades to install the transmission grid needed to move the power to where it is needed.

The constraint is not one of political will or even funding (especially since we have recently demonstrated the ability to print money). The constraint is simply that we haven’t enough trees to support the power lines we need.

Obama also explained in his speech that authorizing drilling or building new gas pipelines will have no effect on current prices. He is quite correct. It will take perhaps three to five years before increased domestic drilling and new pipelines affect prices. This is a stunningly poor excuse for more delay.

Considerations about energy policy and the effect gasoline prices play on economic performance need to be wisely and thoughtfully balanced against potential damage to our environment. These are policy decisions to be made by those who win elections, which was what the speech was really about.•

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Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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