How Foreign Policy Affects Gas Prices

by Rep. Ron Paul - Aug. 18, 2008

We've heard how the value of the dollar affects gas prices – and indeed the price of everything. I was pleased that my request for a hearing on such was granted by the Financial Services committee and we were able to hear some very informative testimony. Certainly domestic policies, regarding off-shore oil drilling bans, ethanol mandates, refining capacity, and CAFE standards are interventionist and harmful enough in the energy market.

But how does foreign policy affect gas prices? One important factor is that oil on the world market has been priced in dollars exclusively since 1973. Only two leaders have gone against this arrangement - Saddam Hussein in 2000 and more recently Mahmoud Ahmadinejad with the recently opened Iranian Oil Bourse which trades in non-dollar currencies. But since oil is otherwise exclusively traded in dollars, this means that oil producers have vast amounts of assets held in dollars. Especially since the War on Terror and the PATRIOT Act, many oil-producing nations and banks are concerned the US government may freeze assets based on flimsy pretexts. This fear contributes to dollar weakness, and therefore also high oil prices.

Recently I and other members of Congress spoke out against H Con Res 362 and exposed this seemingly innocuous bill for what it really is – a call for a blockade and a build up to war with Iran. Thankfully it has not come to the floor for a vote as I had fully expected it would. But to even propose legislation like this, and get an alarming 261 cosponsors, makes the oil markets jittery and encourages more capital flight from the dollar. We only isolate ourselves on the world stage with actions and attitudes like this. After all, how can it be wise for the rest of the world to bank on America, when we tend to freeze assets and blockade entire countries for no good reason?

Another major factor is our intervention in international military conflicts. These conflicts are often much more complicated, and have more to do with oil than our own leaders are willing to acknowledge. Too often the side we support points our weapons right back at us down the road. The best policy is always free trade with all and entangling alliances with none, but instead we isolate ourselves by picking sides and making enemies out of our friends or potential friends. In the recent conflict with Russia and Georgia, it appears that once again the administration is going to pick sides and send taxpayer money, when we are in a deep recession here at home. There is no good reason for us to put a dog in every fight around the world.

The contributing factors in the price of oil are complicated and legion. The fact is, it is an immensely valuable resource, and, as our demand for this resource is great, our relationships with world leaders who control it should be handled with reason and intelligence. However, our interventionist mindset when it comes to foreign policy never ceases to get us into sticky situations, for which we pay a premium at the gas pump.

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[p.d.]

Read Dr. Ron Paul's other columns here.

High Gas Prices: It’s Time for a Revolution!

By John W. Whitehead - July 7, 2008

The oil and gas crisis is putting an escalating number of Americans in peril of losing their livelihood. Skyrocketing fuel prices are affecting everything from the five-day work week and family vacations to essentials like clothing and food. In Hawaii, for example, residents are paying $8 for a jar of Jif peanut butter, $5.50 for a loaf of white bread, $6.50 for a gallon of milk and $7.19 for a half-gallon of orange juice.

Everywhere you turn, from bakeries, grocery stores and restaurants to ice cream shops, owners are posting signs apologizing for having to raise their prices. Small towns are being wiped out. The ability of the average American to make ends meet is getting harder and harder. And we haven’t even hit winter yet, when heating bills will kick in with a vengeance.

With retail gas prices in the United States expected to surge well over $4 per gallon by August, Americans are understandably feeling powerless and frustrated. And to hear the politicians talk, there’s not much they can do about it.

Granted, there are a lot of factors that contribute to the skyrocketing price of gas. But if the American government really wanted its citizens to have access to cheaper oil and gas, surely it could find a way that does not involve invading another Middle Eastern country.

After all, the five largest oil companies in the world—ExxonMobil, BP America, Shell, ConocoPhillips and Chevron—are all based in the U.S. Yet in typical fashion, Americans are paying record gas prices at the pump, while these companies (which made record profits of $123 billion last year) continue to receive billions of dollars in tax breaks—at taxpayer expense.

The United States buys more oil than any country in the world (although China and India are not far behind). That gives us bargaining power. It’s time to put that power to work and play hardball with the oil companies. In other words, it’s high time that our so-called representatives in Congress do their job.

Unfortunately, Congress has been bought out by the gas and oil interests. Since 1990, the oil and gas industries have contributed more than $200 million to the election campaigns of Republicans and Democrats, with the majority of those funds going to Republicans.

As investment columnist Jim Jubak pointed out several years ago, “Think it’s a matter of chance that we don’t have a meaningful national energy policy? Wondering why oil and gas companies don’t pay higher royalties to the Treasury now that oil is over $55 a barrel? Amazed that Washington loves to talk about energy research with promise 15 years down the road, but won’t put significant money into alternative technologies that could reduce energy consumption now? For answers to all those questions and more, just follow the money.”

The money trail leads right to the legislators who look out for the best interests of the oil and gas industry. Said Jubak: “[T]he industry keeps its eye on the prize. If you want to keep oil and gas royalties low; if you’d like to drill in environmentally sensitive areas; if you want to keep the government from admitting that global warming might exist; if you want to make sure that money flows to research in alternative energy technologies for the future but not to commercialize alternative technologies today, then you give to the key people who can get those jobs done.”

It’s no coincidence that the top four recipients of gas and oil money in Congress—Kay Bailey Hutchison, Phil Gramm, John Cornyn and Joe Barton—all hail from Texas, a big oil state. Then there’s all the money that’s being poured into the race for the White House. John McCain, Rudy Giuliani, Mitt Romney, Hillary Clinton and Barack Obama were among the top recipients of campaign contributions from the oil and gas industries during the 2007-2008 election cycle.

If our representatives weren’t so afraid of upsetting the lobbyists, special interest groups and mega-corporations that pull their purse strings, we might actually have a chance of alleviating this crisis. But there is hope.

Remember, this is an election year, and we’ve got the power of the ballot box behind us. It is Congress’ responsibility to protect the American people. After all, oil is a natural resource. In a sense, it belongs to all of us. And if our representatives, with all their collected resources and knowledge, can’t figure a way out of this mess, then we need to elect people who can. As Jubak urges his readers, “vote your convictions. Throw this year’s bums out. They certainly deserve it.”

Whatever we do, we’d better start now. This is just the first wave. We’re in a recession, but things could turn for the worse soon. And if we don’t deal with it now, then there won’t be much hope for stabilizing the economy.

If it means that we stop acting like a warring empire and start practicing diplomacy with other oil-producing nations such as Iran, Russia and Venezuela, fine. If it means regulating the oil monopolies so that our natural resources are put to better use for the good of the American people, not just an elite few, so be it. If it means establishing a government-owned company to produce the oil and keep gas prices low as a benefit to the nation’s citizens, as they do in Venezuela and Saudi Arabia (where gas costs less than a dollar per gallon), then let’s pursue that option.

The American people are not helpless. Anyone with a pen or a computer can and should be bombarding Congress and the White House with letters and emails voicing their discontent over this state of affairs. It’s time for “we the people” to speak up, and speak up loudly.

Americans have been too long-suffering for too long. Folks, it’s time for a revolution.

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[by permission]

Read John Whitehead's other columns here.

Rising Energy Prices and the Falling Dollar

by Hon. Ron Paul - June 9, 2008

Oil prices are on the minds of many Americans as gas hits $4 a gallon, and continues to surge. How high can prices go? How can we solve these problems? What, or who, is to blame?

Part of the answer lies in understanding bubbles and monetary inflation, but especially the Federal Reserve System. The Federal Reserve is charged with controlling inflation through interest rate manipulation, however, many fail to realize that creating money, and therefore inflation, is really its only tool. When the Federal Reserve inflates the dollar as drastically as it has in the past few decades, the first users of the newly created money go in search of investments for their dollars. They must invest this money quickly and aggressively before it loses value. This causes certain sectors to expand beyond what would naturally occur in the free market. Eventually the sector overheats and the bubble bursts. Overinvestment in dotcoms eventually led to a collapse of the NASDAQ. Next we had the housing bubble, and now we are seeing the price of oil being bid up in the creation of another new bubble. Investors are now looking to commodities like oil, for stability and growth as they pull capital out of real estate. This increased demand for investment vehicles related to oil contributes to driving up the price of the actual product.

If the Fed continues with its bubble blowing policies of the past, the new commodities bubble will continue to grow, gas prices will continue to go up, as the value of your dollars go down. We will see an overinvestment in these commodities as solutions are desperately sought for a supply shortage, which is only part of the problem. Make no mistake, though, this is not the free market at work. Government manipulations have added levels of complication and unintended consequences to the marketplace.

This is not the time for members of Congress to take political potshots at each other, or to imagine that the free market is somehow to blame. This is the time to understand and fix problems. That begins with making sure the decision makers have a firm grasp on the causes of the problems and possible effects of their decisions. This is absolutely crucial if we want to get it right this time. That is why I am in the process of calling for hearings on Capitol Hill on how the falling value of the dollar affects energy prices.

Governments need to get out of the way and let the people get back to work so that we can get our economy back on stable footing. Our destructive regulatory environment, confiscatory tax policies, and managed, rather than free trade have chased many businesses overseas. The bottom line is average Americans are being seriously hurt by these flawed policies, and they are not getting good information about the true dynamics at work. The important thing now is to get the diagnosis absolutely correct so we can administer the appropriate treatment and move on to a healthier economic future. To do this it is absolutely necessary to address the subjects of central banking and fiat money.

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[p.d.]

Read Dr. Ron Paul's other columns here.

Congress Is Clueless On The Oil Issue

The U.S. Congress continues to show an incredible amount of ignorance on the oil issue. This week, the U.S. Senate held a hearing on the high price of oil and called out a group of oil company executives to testify. In addition, the U.S. House of Representatives approved a bill to sue OPEC over the high oil price. All of this grandstanding by our so called elected officials is going to do nothing to resolve the high oil price. This is a case of the U.S. Congress misdirecting the blame of the high oil price on OPEC and the major oil companies when they are really only minor players in this game. Threatening to sue OPEC is an incredibly stupid move because that could very well have the reverse effect and cause OPEC to respond to this threat by reducing the amount of oil they decide to pump. The two major reasons for the high oil price involve the Federal Reserve devaluing the U.S. Dollar through their monetary policies as well as the U.S. occupation of Iraq and Afghanistan. On top of this, it is clear that the Bush administration is looking for any excuse possible to bomb Iran. ...MORE

Source: Funny Money Report - Lee Rogers - May 26, 2008

Americans Driving At Historic Lows

(PressMediaWire) WASHINGTON - May 26, 2008 - Americans drove less in March 2008, continuing a trend that began last November, according to estimates released today from the Federal Highway Administration.

“That Americans are driving less underscores the challenges facing the Highway Trust Fund and its reliance on the federal gasoline excise tax,” said Acting Federal Highway Administrator Jim Ray.

The FHWA’s “Traffic Volume Trends” report, produced monthly since 1942, shows that estimated vehicle miles traveled (VMT) on all U.S. public roads for March 2008 fell 4.3 percent as compared with March 2007 travel. This is the first time estimated March travel on public roads fell since 1979. At 11 billion miles less in March 2008 than in the previous March, this is the sharpest yearly drop for any month in FHWA history.

Though February 2008 showed a modest 1 billion mile increase over February 2007, cumulative VMT has fallen by 17.3 billion miles since November 2006. Total VMT in the United States for 2006, the most recent year for which such data are available, topped 3 trillion miles.

Additionally, the U.S. Department of Transportation estimated that greenhouse gas emissions fell by an estimated 9 million metric tons for the first quarter of 2008.

The estimated data show that VMT on all U.S. public roads have dropped since 2006. The FHWA’s Traffic Monitoring Analysis System (TMAS) computes VMT for all types of motor vehicles (motorcycles, cars, buses and trucks) on the nation’s public roads. These data are collected through over 4,000 automatic traffic recorders operated round-the-clock by state highway agencies. More comprehensive data are published in the FHWA’s “Highway Statistics” at the end of each year.

To review the FHWA’s “Traffic Volume Trends” reports, visit http://www.fhwa.dot.gov/ohim/tvtw/tvtpage.htm. For “Highway Statistics 2006,” visit http://www.fhwa.dot.gov/policy/ohim/hs06/index.htm.

### SOURCE: U.S DOT - press release

At what prices? - oil crisis

We are in the middle of a economic crises because of the price of oil and gas. However, U.S. energy policies are outdated and have stopped the American economy cold. These outdated leftist policies have succeeded in making energy cost more than we can afford. Americans don't need more regulations from Washington. America needs more oil supply and more refinery capacity. The only place that we can't get oil is from all our domestic sources. If you feel that gas is too high, please thank the Democratic environmental energy policies that have overwhelmed the American economy. ...more

by Mike Moseley - theconservativevoice.com - May 20, 2008

When Candidates are Dangerously Wrong

Americans have painted themselves into the corner on energy and the two presumptive candidates for President are ready to finish off the nation with the worst possible “solutions.”

Sen. Barrack Obama is talking of “windfall profits” taxes on the oil companies, thus threatening to take away the money they need to invest in exploration, extraction, refining and delivery of the gas and oil we need to fuel our cars and trucks, and heat our homes.

...There is a price for being an idiot. Think about that the next time you fill up your gas tank. ...more

By Alan Caruba - Warning Signs - factsnotfantasy.blogspot.com - May 13, 2008

Gas Prices and ANWR - Your Chance to Act

We're not just trying to get your attention! Make no mistake... the price you pay for gasoline at the pump may soon rise to over $4.00 a gallon!

In fact, prices are already ABOVE $4.00 a gallon in some areas of the country!

Did you know that gasoline costs 45 cents a gallon in Saudi Arabia, 35 cents in Iran, and less than a quarter in Venezuela?

Question: Why does gasoline cost so little in these third-world countries and so much in the United States of America?

Answer: Because Saudi Arabia, Iran, and Venezuela harvest enough oil to take care of their own people, and WE DON'T!

Can we do something about it?

YOU BET! In fact, President Bush called for opening the Arctic National Wildlife Refuge (ANWR) to oil exploration.

Geologists tell us that ANWR sits on top of enough oil to give us the energy-independence we once enjoyed... Independence we frittered away through years of cowardly kowtowing to Greenies and Liberals.

Conservative estimates by the U.S. Geological Survey confirm that ANWR would produce at least 10.4 billion barrels of new oil!

So what does that figure mean to us ordinary folks who drive cars?

It means we'd have...

Enough oil to replace 30 years of imports from Saudi Arabia and 58 years of Iraqi oil!

Enough oil to run the District of Columbia, our nations Capital, for 1,704 years!

Enough oil to run 29 U.S. states for more than a century!

Enough oil to cut a major chunk out of the $150 BILLION the United States spends every year, buying oil from our enemies, who -- out of envy and hatred -- hold us hostage and gouge us.

And heres the kicker: Some experts predict the ANWR yield could run as high as 27 BILLION BARRELS!

So who's stopping us? Who's holding us hostage? The Democrats and RINOs on Capitol Hill -- frantically kissing the feet of crazed Greenies -- who would prefer to see you and your family suffer than inconvenience one polar bear or walrus or caribou. ...more

GrassTopsUSA.com - May 8, 2008>

OUT OF TOUCH WITH THE AMERICAN PEOPLE

Paul Blasts Gas Tax Proposal

ARLINGTON, VIRGINIA – Republican presidential candidate Ron Paul says a proposal to raise the federal gasoline tax is the last thing the American people need in a slumping economy. The recommendation comes from a panel made of corporate executives and government bureaucrats commissioned by Congress in the 2005 transportation bill. Congressman Paul was one of nine votes in the House against the bill.

“This is a great example of how out of touch big government and big business are with the American people,” Paul said. “With gas at three dollars a gallon and a slowing economy, the last thing we need is a tax increase to be paid by Americans who can least afford it.”

Paul called on the other presidential candidates to join him in opposing this and any other tax increase proposals that come down in the future.

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[p.r.] RonPaul2008.com - January 15, 2008 11:30 am EST

Pain at the Pump - by Hon. Ron Paul

Nov. 25, 2007 - from Texas Straight Talk

This past week Americans traveled approximately 2 billion miles to celebrate the Thanksgiving holiday with family and loved ones. While you cannot put a price on time with family, Americans sure felt the pain of higher fuel prices at the gas pump. It is time to take an honest look at the government's direct and indirect role in inflating those prices.

Taxation is the most direct way government increases Americans' cost at the pump. The national average price of gas now is well over $3.00 per gallon now, $4 in some areas. Federal taxes take 18.4 cents, while state and local taxes average another 28.5 cents per gallon. That's an average of 47 cents per gallon Americans are paying just for government, but that is just the tip of the iceberg. Less directly, our loose monetary policy gives taxpayers double jeopardy at the pump, simultaneously increasing prices and undermining purchasing power. Wages always lag behind price increases, making average Americans feel as though they can never quite keep up, never quite get out of debt. Not to mention the ripple effect of higher diesel costs on the trucking industry. When trucking and shipping is more expensive, everything is more expensive.

The indirect costs government imposes on gas prices are much more serious. A major bottleneck that causes gas prices to surge is our very meagre and vulnerable refinery capacity due mostly to regulatory red tape. Environmental regulations and litigation have kept our existing refinery capacity barely adequate. In fact, no new refineries have been built since the 70's and these are operating at capacity, which makes our gasoline market especially vulnerable as demonstrated by skyrocketing gas prices in the aftermath of Hurricane Katrina when many coastal oil facilities were brought to a halt. In addition, many foreign refineries don't have the ability to produce the specialized blends of gasoline mandated by our government, and therefore 90% of our gasoline is refined in the United States under extreme regulatory burden. When our domestic refineries are damaged or jeopardized, there are few options other than soaring prices or long lines.

I've introduced The Affordable Gas Price Act (HR 2415) to deal with some of these issues. My bill would suspend Federal fuel taxes when prices rise above $3.00 a gallon, giving some immediate relief at the pump. It would also repeal misguided legislation that causes more investment in attorneys and nuisance litigation than in actually producing affordable gasoline and strengthening our refining capacity. Also, it would open up ANWR for oil exploration and repeal the federal moratorium on off-shore drilling.

Much of government intervention in the oil industry in the past has been counter-productive and has resulted in disastrous unintended consequences. This Thanksgiving, I am grateful for every mile Americans can still afford to travel to be with family. I am working hard in Congress to reverse the costly trend of government interference and return markets, including oil markets, to true economic freedom.

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