Economy Now

Instant reaction and smart charts on economic trends.

Politicians can't lower gas prices. But neither can oil companies.

March 6, 2012: 2:23 PM ET

Americans are rightfully annoyed about rising gas prices. But politicians are making matters worse. They are fueling (pun intended) the anger by constantly talking about how they will lower gas prices.

Newt Gingrich is the latest, with his promise for $2.50 a gallon gas. President Obama bemoaned the spike in gas prices in a speech Tuesday as well.

I wish whomever is occupying the White House next January good luck in lowering gas prices. But words and rhetoric aren't going to do it. Rob Perks, Transportation Advocacy Director for The Natural Resources Defense Council, a nonprofit environmental organization in Washington, said as much in a blistering blog post Tuesday titled "Empty Promises, Empty Gas Tanks"

"As a global commodity, gas prices rise and fall due to a number of factors: crude oil prices, refinery capacity, increasing demand and political unrest in oil-producing countries. It seems like some people think the Constitution guarantees Americans the "right" to cheap gas, but the only price that is right is whatever the market will bear. That's why no president can control what we pay at the pump. Any politician that says otherwise is trying to sell the public snake oil," he wrote.

Amen to that. However, Perks takes a disturbing turn away from defending free markets later in the same post.

This troubles me

"Here's an idea: Let's stop rewarding multi-national oil companies that reap record profits from us ($137 billion last year!) while collecting another $4 billion in federal subsidies every year. That's right, Big Oil has been gouging the little guy at the pump, then flying private jets to Congress and demanding more taxpayer handouts."

This argument, to quote a favorite Tim Gunn from Project Runway saying, troubles me. It's okay to bash politicians for pandering to the public while at the same time engaging in populist bashing of Big Oil companies? Don't get me wrong. The Exxons (XOM), Chevrons (CVX) and BPs (BP) of the world have a lot of problems. But how are they gauging the little guy if Perks admits that it's the market, not the oil companies, that set the prices?

It seems that every time oil and gas prices shoot up, people are quick to say the solution is for the government to punish oil companies for high profits. That's misguided. I wrote a column on CNNMoney nearly four years ago criticizing those who were calling for a windfall profit tax on oil firms. In it, I showed that oil companies were adding jobs in the U.S. as commodity prices were rising. What's more, wages for energy workers were significantly higher than the national average.

I took a quick look at the BLS web site again and according to their most recent breakdown (albeit from May 2010) for wages by occupation, the mean hourly wage for "Oil and Gas Extraction" workers was $37.22 an hour. That worked out to about a $77,000 average salary. The average for all workers was $21.35 an hour or $44,000 a year.

Nobody likes to pay $4 a gallon or higher for gas. But we'd be foolish to forget that the oil business is an important part of the U.S. economy and that many hard-working Americans benefit when energy companies are doing well.

Join the Conversation
About This Author
Paul Lamonica
Paul R. La Monica
Assistant Managing Editor, CNNMoney

Paul R. La Monica is an assistant managing editor at CNNMoney. He is the author of the site's daily column, The Buzz, and also tweets throughout the day about the markets and economy @LaMonicaBuzz. La Monica also oversees the site's economic, markets and technology coverage.

Powered by WordPress.com VIP.
Follow

Get every new post delivered to your Inbox.

Join 91 other followers