Recent news reports have noted that as gasoline prices have risen, the President’s popularity has declined commensurately. From a practical point of view this makes no sense, because the President has absolutely no control over energy prices. He can’t even reduce or increase taxes on gasoline unless the Congress passes legislation, and he certainly can’t set gasoline prices.
In economic terms, crude oil and gasoline are what are known as fungible commodities, that is, there’s no price distinction between light crude from the United States, Saudi Arabia, or elsewhere. The only price differential in the marketplace is the transport cost from the point of production, and since Middle East oil has a lower cost of production, in most cases, transportation costs don’t affect the price of crude, only the price of refined gasoline. What that means, among other things, is that “Drill, Baby, drill!” isn’t going to make a measurable difference in gasoline prices. In fact, as U.S. production of oil has increased over the last few years, it’s made no appreciable impact on gasoline prices because world-wide demand has increased and will continue to increase as countries such as India and China build and use more cars and trucks.
The only time in the last 60 years when a President attempted to control gasoline prices was during the Nixon administration when Nixon imposed price controls [through legislation he requested and Congress passed]. The result was a disaster. Because oil companies could not pass on the costs of higher-priced crude oil, they stopped buying and producing it because to do so meant losing money on every barrel of higher-priced oil. The result was gasoline lines blocks long all over the nation and fuel shortages.
On the other hand, North America is literally awash in natural gas at present. Interestingly enough, even though natural gas prices are close to all-time lows, which means that most homes heated by natural gas have seen real heating costs decline, this doesn’t seem to translate into greater political approval for the President or anyone else.
What continues to be overlooked in the debate over Romneycare/Obamacare [The Affordable Health Care Act] is the issue of “transferred costs.” Because hospitals are essentially required to provide health care for those who need it, the costs involved in providing such care to those unable to pay have to be “transferred” to someone else – or the hospitals would go broke. Because doctors can refuse to provide services to those who cannot pay, the uninsured overuse hospital health care, especially at hospital emergency rooms, and that drives up health care costs. Because they cannot pay, the hospitals transfer costs to other paying patients, or their insurance companies, or governments. There are two classes of uninsured – those who could afford insurance and choose not to pay for it and those who either cannot get it or cannot afford it. The thought behind the Affordable Health Care Act was to provide insurance to those who could not afford it and require those who could to purchase insurance or pay penalties, thus addressing the cost issue and theoretically redistributing health care away from overuse of expensive hospital facilities. Regardless of whether one agrees with the Act or not, the driving force was the accelerating cost of health care and the economics behind it – and, so far as I can see, none of the opponents of the Act have come up with a viable and workable way of addressing those economics. They don’t want to require universal insurance; they don’t want a single payer system; they oppose any cost-cutting measures that will make a real difference; and they don’t want to deny health care to anyone. Under those parameters, health care costs in the U.S. will continue to rise, even though they’re the highest of any developed nation… and our health is below average. The issue is economics, and no one wants to confront that reality.
Whether it’s gasoline or health care prices…it’s so much easier to cast stones… especially at politicians, and especially when they deserve blame for other things. But right now, on too many economic issues, people are blaming politicians, and politicians are trying to blame anyone else… and none of them want to look at the economics.