Never mind what your econ101 class told you. When it comes to oil, there is a lot more going on than price, supply, and demand. Although it is true everywhere, it is particularly true in America: in the short term, demand is very, very sticky, and thus often works largely independent of price. Think about your own life for a moment and this will make sense. The location of your home, the location of your job, and the type of car you drive are the three things that largely determine your level of consumption, and none of them are easy to change. Thus, as the price of gas goes up, its very difficult for you to change your behavior such that you consumer less.
And if you think that's bad, scale up and think about it at a societal level. The roads we build and the suburban communities we develop might be changeable over multiple decades, but over the short term they are essentially fixed.
And that's why the growing evidence that we've reached the peak of oil production is really, really scary. On Monday, for example, OPEC ministers warned that oil may head to $200 a barrel, and there's not much they or anyone else can do about it.
And that stupid gas tax holiday that bothMcCain and Clinton have embraced? It will do much more harm than good.
UPDATE: James Fallows lets it rip:
The pandering and ignorance-across-party-lines represented by the John McCain-Hillary Clinton united front for a temporary reduction in the gasoline tax should make Americans hold their heads in their hands and moan. No one who has thought about this issue thinks that it will actually reduce prices or -- more important -- help the the people disproportionately hurt by $100+/barrel oil and $4 gasoline. And to the extent it has any effect on America's long-term approach to energy policy, transportation, oil dependence, and climate change, the effect will be perverse.I can imagine that John McCain, who boasts about his sketchy command of economics, might consider this a good idea. But the master of policy, Hillary Clinton??
Please. This is embarrassing. It makes me long for the good old days of debating about flag pins on the lapel. And I wonder: has there been bipartisan agreement to stupider effect in, say, the last fifty years? The US Senate's 88-2 vote in favor of the Gulf of Tonkin resolution in 1964 doesn't count: they didn't know what lay ahead. Hillary Clinton, at least, knows why what she is saying is wrong. I will pay for a year's subscription to the Atlantic for anyone who can come up with a more foolishly destructive bipartisan example.
Update: The 2002 Authorization for Use of Military Force vote that paved the way for war in Iraq doesn't count either. That vote reflected terrible judgment, in my view, but not outright stupidity or, as with the current gas-tax charade, certain foreknowledge that the policy being recommended would do no good.
UPDATE II: And Ezra:
Policy is hard. Lots of people come to different conclusions. Unanimity is rare. Except on this gas tax holiday. Just about no one thinks it a good idea. Conservative economists loathe it, liberal economists loathe it, energy experts loathe it...it's shameless pandering of the worst sort. So is the media going to create a scandal around McCain's pander? Around Clinton's copy-pander? Will they hound them at press conferences, run segments about the derailed "Straight Talk Express," bring on pollsters to ask whether Americans are tired of being lied to?Well, not quite. There's some evidence that the media is, at least, representing them aggregate opinion of the experts. And Tom Friedman is certainly on the side of the angels here. But that's as far as the media's been willing to take it. As of yet, there's no real effort to report on a bald-faced, shameless policy pander in the way they reported on Tuzla or "I voted for it before I voted against it."
When confronted by the fact that their coverage of politics is frequently trivial and annoying, many in the media argue that they only report that way because the voters make their decisions based on trivial and annoying issues. But there's no doubt that, with proper press coverage, the gas holiday could be one of those trivial and annoying issues that comes to stand-in for broader character failures or narratives or whatever. It's just that the media doesn't like to deal with policy.
UPDATE III: Matt Yglesias counters with this:
UPDATE IV: Tom Friedman:
It is great to see that we finally have some national unity on energy policy. Unfortunately, the unifying idea is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away. Hillary Clinton has decided to line up with John McCain in pushing to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for this summer's travel season. This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.
John Cole then piles on:
Being called ridiculous by the guy whose last big idea was that the world is flat has got to leave a mark. This gas tax holiday nonsense is so stupid that even the Cato Institute trotted out Jerry Taylor to CNN to report that it was a dumb idea.
I really can not figure out what is more offensive about this pandering from Clinton and McCain- that they think they can fool you into believing the gas tax holiday will actually lower gas prices (it won't), or that they think your vote can be bought for the princely sum of 2-3 bucks per week. We'll call it a tie.
UPDATE V: Publius:
What's troubling about the Great Gas Tax Pander is not so much the pander itself, but the larger more general concerns it raises about Clinton (who, of course, remains infinitely superior to McCain).
First, it shows that Clinton is more likely to use arguments that explicitly rely on voter ignorance. She knows that this policy stinks, but she is assuming that low-information voters won't know the difference. Those silly latte drinkers with their fancy-pants inelasticies don't understand the working man. But snark aside, the lack of respect for her audience shows far more elitism than Obama's earlier comments ever did. (See also Michigan primary).Second, and more troublingly, the pander provides further evidence of Clinton's instincts to run from progressive positions in the face of political pressure from the right. Like Bill before her, she is very quick to adopt conservative, nationalist positions at the expense of sound policy in these circumstances (e.g., gas tax, "obliterate Iran," Iraq, Kyl-Lieberman, etc.).
I can think of two explanations for this behavior. One, she's not very liberal. Two, her guiding political philosophy is to avoid looking too liberal. Either way, not good.
I think we are officially approaching blogswarm levels on this one.
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