Tag: gas prices

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Common Sense

Gas Price Fears

Fear stinks.

Literally, yes; but figuratively, too.

Moved by fear, we tend to get a bit irrational. Whenever something unpleasant happens to us all, there’s this tendency for mass irrationality.

I bring this up just as much to remind myself as to remind you. We’re all affected. Even something as mundane as gasoline prices can send the collective intelligence down a few IQ points.

Recently I wrote a column at Townhall on the widespread belief that prices will always and only go up.

I suggested that gas prices would likely go down soon. I’m not an economist. But I do remember a bit of history … some of the history that has occurred in my own life!

Why would prices plummet? Well, oil is such an important product that not only can it “drive us crazy,” but when the prices go high enough, it can cause recessions — that is, economy-​wide business and project and plan failures. So, during recessions, demand goes down. And when that happens, prices have to go down, to follow. As Alan Reynolds of the Cato Institute reminds us, this has happened nine times since World War II. The drops ranged from 44 percent to 76 percent.

And, as Reynolds points out, even small-​but-​persistent demand drops, even without a recession, can cause the downturn in prices.

So the last thing we should do is let our gas price fears drive us to seek solutions from politicians.

This is Common Sense. I’m Paul Jacob.

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Common Sense

The Muddle Men

There are two competing visions of the social hierarchy:

1. The Elitist View: The people are fools needing to be led by experts.

2. The Populist View: The people have common sense while their leaders are generally fools or knaves or both.

You can guess which one I tend to favor. But recently, I’ve seen some evidence suggesting a third position …

3. The “It’s All a Muddle” Theory: The people are prone to conspiracy theories and outrageous nonsense while their leaders fan the flames of folk paranoia just to get ahead.

This third view fits the current energy debate. Every time fuel prices rise, I get inundated with conspiracy theories and cockamamie economics. The current notion? That gas prices are rising because of speculators.

It doesn’t make much economic sense, and it flies in the face of good supply and demand reasons that everyone should know about. But a lot of people buy into the finger-pointing.

And so do our leaders. Senator Barack Obama has called for two departments of the federal government to investigate the influence of speculation on pricing. Senator John McCain has made similar — if less clear — rumblings on the same theme.

Just as the major presidential candidates talk about “change,” they strike the usual politician’s pose — as demagogues.

Look folks, we need middlemen, like futures traders. But we don’t need “muddle men,” like Obama and McCain.

This is Common Sense. I’m Paul Jacob.