K. Lloyd Billingsley - Contributor
[Courtesty of Pacific Research
Billingsley is Editorial Director for the Pacific
Research Institute and has been widely published on topics
including on popular culture, defense policy, education reform,
and many other current policy issues. [go to Billingsley index]
[K. Lloyd Billingsley] 9/11/03
of gasoline spiked sharply over the Labor Day weekend and prices
Cruz Bustamante, the Lieutenant
Governor who aspires to be Governor, wants to slap government
price controls on gasoline. An intriguing response to this notion
came in "Bustamante's Folly: Gas Price Controls Would Bring
Back Lines," an August 30 editorial in the liberal Sacramento
"In a gubernatorial election contest with 135 candidates
on the ballot, the competition for who can come up with the dumbest
idea is bound to be fierce," said the Bee, " But Lt.
Gov. Cruz Bustamante's call Thursday for state price controls
on gasoline makes him the clear front-runner."
The Bee noted
that "as in any market gasoline prices rise
and fall," but observed that politicians only sound off
on oil company "gouging" when prices jump. When prices
are low - in the late 1990s they were as low as at any time during
the past 50 years - nobody gives the companies any credit. The "real
explanation," the Bee said, lies in "the balance between
supply and demand, and the structure of the state's gasoline
Demand for gasoline has soared, but there has not
been a similar drop-off in demand. The Bee noted that a pipeline
Texas caused gasoline headed for the California market to be
rerouted to Arizona.
"California is especially vulnerable to shifts in supply
and demand," said
the Bee, because "air quality rules requiring special California
blends of fuel make it an island in the international market.
And the politically driven decision by President Bush and Congress
to force ethanol into California gasoline has caused technical
problems that make the state's already tight supply even tighter."
Bee wants an end to the ethanol requirement, more pipeline connections
out of state, a state gasoline reserve, better fuel
efficiency, and higher fuel taxes. "But the price controls
Bustamante proposes would be a disaster," said the newspaper,
recalling the long lines of 30 years ago under federal price
Bustamante doesn't understand simple economics," the
editorial concluded, "or he's pandering to people who don't." Meanwhile,
there are other issues for policymakers, including energy secretary
Spencer Abraham, now conducting an investigation into gasoline
pump gasoline from the ground. Crude oil must be found, extracted,
and refined into gasoline, airplane fuel,
products. This is what oil companies do, often under difficult
and dangerous conditions.
abroad should promote domestic production and exploration.
Refining capacity should also be
expanded. According to the Federal
Energy Information Administration there were 324 refineries
in the United States in 1981 but last year only 149. Since demand
for gasoline has increased, we need to build more refineries.
That would require standing up to an environmental lobby that
opposes such construction and wants gasoline to cost even more.
gallon of gasoline includes 18.4 cents in federal taxes,
18 cents in state taxes, plus sales tax, close to 45 cents
and about 25 percent of the current price at the pump. Instead
of grandstanding or calling for price controls, which don't
work, politicians could simply lower these taxes.
give California commuters much needed relief. But it requires
standing up to a government establishment that
doesn't understand simple economics and panders to people
2003 Pacific Research Institute