Sunday, February 19, 2012

Gasoline Price Hysteria

Gasoline Price Hysteria: With unemployment declining, Republican politicians in the U.S. have seized upon the recent modest increase in retail gasoline prices to talk up the possibility of $5 gas this Summer. Despite the ever present danger of a Middle East crisis that could cause prices to spike, the markets that these politicians trust so much do not support their alarms. Market-based analysis projects gasoline retail prices to average $3.55 per gallon in 2012, compared with $3.53 cents per gallon last year, and then average $3.59 per gallon in 2013. During the April through September peak driving season each year, prices are forecast to average about 7 cents per gallon higher than the annual average, i.e about $3.62 this Summer. Recent options and futures price data imply that the market believes that there is about a one-in-four chance that the U.S. average pump price of regular gasoline could exceed $4 in June of this year.

I always hate fixation over gas prices because it forces the uncomfortable conversation about how drivers are already having their gas prices subsidized by the governments failure to insert externalities into the equation.  Sadly if we expect market forces to create incentive's for people to decrease usage prices will have to go up a whole lot more.  The failure of government to do its job means the working class is getting swallowed whole by those costs.... (but then again the failure of the working class to organize and hold politicians accountable for poor transit options....I digress...) 

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