Pain at the Pump

Economists believe the recovery slowed as gas prices jumped in the first quarter of the year, writes Timothy Horman for Bloomberg.com.

I'm no economist, but I could have told you that. I've seen it before. The most extreme example, I suppose, was about three years ago, which was the last time gas prices were this high.

Barack Obama, as focused as he is these days on his re–election campaign, is clearly influenced by what is happening at the pump. His predecessor's approval numbers in his final year in office were never impressive, but they were at their worst when gas prices were at their highest.

I have no doubt that Obama remembers those days — and perhaps with some personal fondness. I don't mean that Obama was glad that prices went so high and, in the process, hurt so many people, but they did help him present himself as the anti–Bush during his last campaign — and Obama obviously would love to recapture the messianic feeling of that time. It propelled him to the presidency.

But now rising gas prices threaten to undermine Obama's re–election campaign, and he needs to project the image of a forceful president who is being proactive. Consequently, even though he himself has acknowledged that there is little, if anything, that a president can do to influence gas prices, he promised to form a task force to examine the situation and investigate whether something illegal was being done to take advantage of consumers.

Sounds good — except, of course, that it's nothing more than a P.R. stunt.

Obama is right when he says that out–of–control speculation is to blame. But excessive speculation is based on anxiety, not necessarily criminal intent.

In my opinion, a task force simply fuels (pardon the expression) the belief that someone out there is behind this.

The anxiety might ease if, as more and more people are suggesting, the situation in Libya is resolved. Libya itself produces a relatively small portion of the world's oil supply, but there are no oil producers who can make up even a small disruption in supply so, as long as the conflict in Libya continues, it seems likely to me that gas prices will remain high.

Some contend that America could make up for that disruption by drilling domestically — in Alaska or offshore. Again, I'm not an expert in these things, but there are at least two problems I can think of with that — there isn't enough oil in those locations to radically alter prices, and it would be years before the oil could be retrieved.

I've also heard talk of eliminating tax breaks for oil companies or adding a gas tax, neither of which seems likely to have much positive short–term impact.

If oil companies lose tax breaks, the most likely outcome, I believe, is that domestic production, not prices at the pump, will be reduced to make up for the lost revenue. And a gas tax is going to raise prices, not lower them.

Either of those (or a combination of the two) could provide funds for the development of alternative energy sources or mass transit expansion, but those are long–term solutions.

There are no simple answers in the short term.

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Trumping the Presidency

I've seen this before.

Nearly 20 years ago, the economy was in a bad way. Not as bad as it is now, but still bad by contemporary standards, and many Americans were desperate for a president who could restore economic equilibrium.

I don't know if many of the people who voted for George H.W. Bush in 1988 did so because they believed he could handle an economic downturn. In fact, my memory of the 1988 campaign is that the economy really wasn't discussed at length — and, when it was, it was mentioned in terms that were favorable to Bush, who, as the incumbent vice president, sought to share in the credit for the things that were perceived as good about the Reagan presidency.

And one of those things was the strong economy.

Things turned sour during Bush's presidency, though, and, by 1992, America was caught in a recession. Americans were looking for a president who understood that "it's the economy, stupid" and would govern accordingly.

The person to whom many Americans turned in 1992 was a man who had demonstrated his ability as a businessman — Ross Perot.

Perot didn't take the nomination away from Bush. He didn't even try.

He did run as an independent. He didn't win the election, of course. He didn't carry a single state. But he captured nearly one–fifth of the popular vote. It was the highest share of the popular vote taken by a third–party candidate in 80 years.

You can still find some people who will tell you that Bush would have been re–elected if Perot had not been on the ballot — even though every exit poll I saw in 1992 said that about 20% of Perot's supporters would not have participated at all if he had not been a candidate and the rest would have been divided about evenly between Bush and Clinton.

Those numbers never added up to a Bush victory if it had been a two–man race.

I didn't vote for Ross Perot in 1992, but I always felt that I understood the reasoning of most of those who did. They believed that someone who had been a success in business would have special insights for dealing with a recession.

I didn't disagree that Perot had been remarkably successful in business, but I never felt that his business skills were applicable to the presidency. An entrepreneur does not have to at least try to resolve conflicts to everyone's satisfaction; his word is law. If two of his employees don't get along or if they disagree, he can reassign — or dismiss — one of them. Problem solved.

That isn't how it works in a democracy. A president who blithely dismisses Congress' input does so at his peril — particularly when one of the chambers just flipped decidedly to the opposing party.

Until last November's midterm elections, Barack Obama's party controlled both chambers of Congress. For awhile, the Democrats' margin in the Senate reached the elusive filibuster–proof 60. But that advantage disappeared more than a year ago. That makes compromise a necessary skill.

In a divided government, the ability to compromise is crucial, and Obama brought no relevant experience with him to the presidency. But neither would this generation's Ross Perot — Donald Trump — whose name is on everyone's lips, it seems.

After Perot ran unsuccessfully for president in 1992 and 1996, Trump toyed with the idea of running as an independent in 2000. But he didn't — ostensibly for several reasons, but I think just one was decisive. The economy in 2000 wasn't bad enough. The Clinton presidency had produced a budget surplus.

I think that tells you everything you really need to know. Still there are people who speculate about why Trump might get into the race this time.

At The Daily Caller, John Ziegler writes that Trump's rise in the polls is the result of a "celebrity–obsessed culture."

And Eugene Robinson's column in the Washington Post says the "birther" issue is fueling the Trump–for–president movement.

It's true that Trump has said he won't disclose his tax returns until Obama discloses his birth certificate — but, frankly, I don't think the "birther" issue is what's driving people to promote Trump for president. Nor do I believe a celebrity fetish is behind it.

It's the economy, stupid.

The Energy Information Administration, part of the Department of Energy, predicts gas prices will be up 40% over last year during the summer driving season. That isn't good news for folks who wanted to hit the road and get away from it all, at least for awhile, this summer — or the people who depend on summer tourism to carry them through the cold and bleak months of winter.

If there is good news to be found in that, it may be that gas prices are already up by about 33% over their level at this time last year — so the increase isn't likely to be as severe as what motorists have already experienced this year.

But no increase will be welcome. You'd think that Obama would be doing anything he can to boost the economy under these circumstances — a Washington Post survey shows that twice as many respondents say they "strongly disapprove" of Obama's handling of the economy as say they "strongly approve" — but he isn't, at least not with the sense of urgency one might expect.

Things are a lot worse in 2011 than they were in 1992, and a lot more voters may be receptive to what Trump has to say.

Philip Klein of the Washington Examiner warns that Trump is no Perot.

But to stressed–out consumers who are weary of waiting for the economy to turn around, it may not matter.

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What's Logic Got to Do With It?

Robert Rapier of the Washington Post deserves credit for trying.

As gas prices have continued to go up, so has the general anxiety level of American consumers.

They heard what Ben Bernanke said about how this would be short–lived, but he's been criticized for overly sunny projections in the past (remind me again, how did his projections work out during the Bush years?) — and they can see how higher gas prices are affecting their personal budgets.

Uncertainty and anxiety begat scapegoats. It always works that way — and, as I say, Rapier deserves credit for his attempts to put out the fire with his piece about prevalent myths about rising gas prices.

But history shows he's fighting a losing battle.

I guess the best place to begin is in October 1973, when the Arab oil embargo occurred. The oil producing nations were only beginning to flex their political muscles at that time, and the price of a barrel of oil in those days (around $5) seems ridiculously low.

But it represented a 70% increase in the price of oil, and, for the first time, Americans began to feel financial pressure at the pump.

The president, Richard Nixon, paid a political price. His approval ratings — which had been in the 30s since it was disclosed that summer that previously secret recordings of Oval Office conversations existed and could verify what had been said — slumped into the 20s that October, and there they stayed until Nixon resigned the following year.

Nixon's dreadful approval ratings were hardly the fault of the oil embargo alone — but it certainly didn't help him.

The same could be said for Jimmy Carter and the 1979 energy crisis.

When 1979 began, Carter's approval rating was right around 50% — but he spent most of the rest of the year struggling with an approval rating in the 30s.

That is not the way any president wants to spend the year prior to seeking re–election.

There were other things that contributed to Carter's difficulties with the voters — and he did enjoy a brief resurgence when the U.S. embassy in Iran was captured — but the energy crisis clearly worked against him.

I believed he was right when he spoke to the American people about the long–term threat posed by our dependence on foreign oil. I thought he was being very logical.

But logic had nothing to do with it.

Rapier is right when he says a president has no influence on what consumers pay for fuel, at least not in the short term. A president's policies can have a long–term effect, but the results will not be seen overnight.

That's the logical way to look at it.

But what does logic have to do with it?

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The Japan Syndrome

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Years ago, I went with my mother to see a movie called "The China Syndrome."

The movie — which starred Jane Fonda, Jack Lemmon and Michael Douglas — was about the perils of nuclear power. The title came from the popular misconception that, if someone in America drilled through the earth, he/she would come out in China. The movie's premise was that, if a nuclear reactor melted down, its core would do something similar.

It was a frightening premise that was made even more frightening by an actual nuclear accident at Three–Mile Island in Pennsylvania not long after the movie made its theatrical premiere.

That event gave the movie a lot of unexpected publicity, resulting in higher–than–expected ticket sales and a lot of anxiety on the part of the public.

We know more about nuclear power now than we did when that movie came out — but not, perhaps, as much as we may have thought — or, perhaps, would like to have thought.

In my adult lifetime, Americans have always seemed eager to embrace the simple solution to a complex problem, and many seem to be taking that approach to the nuclear situation in Japan.

"How bad could it get?" asks Josh Dzieza at The Daily Beast. And that's a fair question to ask — flippant though it may seem.

Barry Brook writes at Brave New Climate about the "misinformation and hyperbole flying around the internet and media" and asserts that "[t]he plant is safe now and will stay safe."

Well, time will tell.

Maybe it is the same mindset that always seems to assure Americans that higher gas prices are only temporary. In the past, yes, gas prices have declined after enormous spikes — but rarely, if ever, to the levels that existed before.

I'm not inclined to think that gas prices will fall to anything resembling what they were just a couple of months ago — especially now because the most vocal proponents of that particular pie–in–the–sky theory (that gas prices will decline almost exclusively on the basis of consumer behavior) also have been advocates of nuclear energy as the solution to the cost of heating and cooling our homes.

Those are the same people who scoffed at President Carter when "The China Syndrome" was at the theaters — because he warned that America's dependence on foreign oil was setting this nation up for disaster.

The recent events in Japan are sure to be mentioned now whenever someone promotes nuclear energy in this country. The issues that have been raised are far too complex to be addressed by a simple solution.

The truth is that, for all that 21st century humans know about nuclear power, there is still much they do not know — even in Japan, which, if anything, has been overly cautious about safety in just about every aspect of its existence when compared to virtually any other place on earth.

That is why you could watch video footage of the area nearest to the ground zero of the earthquake — and see large buildings that were still standing, even though a 9.0–magnitude earthquake struck the area 2½ days ago, and powerful aftershocks continue to strike.

Japan is no stranger to earthquakes. As a result, it has done a remarkable job of preparing its buildings for the possibility that one will strike, but this is the strongest ever to hit that country — and only the third earthquake globally to register 9.0 or higher in the last 50 years. One was the 9.2 earthquake that struck Prince William Sound in Alaska 47 years ago this month, and the other was the 9.1 that struck Indonesia the day after Christmas in 2004.

And this earthquake, along with the tsunamis it has produced, has been causing a number of unforeseen problems. Japan, as I say, always appears to prepare for the worst–case scenario — but its engineers didn't actually anticipate the worst case, only a worse case.

And that could have tragic consequences.

When you are dealing with something like nuclear energy, you must think way outside the box. I don't fault Japanese officials for not preparing for the size earthquake that almost never happens, but the fact remains that attempts to restart the cooling system at one of the damaged reactors have failed.

Safety standards have to be revisited — and, until we know more than we do about nuclear power, we have to treat it with the respect it deserves and prepare ourselves for a disaster that is much greater than anything we've seen — or may be likely to see.

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Perspective

The average price for a gallon of gas in the United States went up 34 cents in the last 13 days, according to CNNMoney.com.

That number made me think.

When I was a child, growing up on a lake outside Conway, Ark., my parents always stopped for gas at the same bait shop/filling station, and the price of gas in those days was so stable that the sign out front never changed. In my mind's eye, I can still see it.

The price was 34.9 cents — for years and years and years.

And now the price of a gallon has gone up by that amount in less than two weeks' time.

Yeah, I know, 34 cents sounds really good to people who are paying anywhere from $3.18 to $3.86 per gallon (that's the current range cited by CNNMoney.com).

Remember — minimum wage was about a buck and a half in those days. Even so, though, it seems to me that folks had a pretty good deal when I was a child.

Let's say we're talking about filling up vehicles with tanks that can carry 15 gallons. Compare paying about $5 to fill that tank from a gross weekly income of about $60 — to paying about $50 to fill that tank from whatever the average gross weekly income is today (for those fortunate enough to be working and not looking for work).

Gas prices today are about 10 times what they were when I was a child — so, for things to be comparable numerically, I suppose, one's weekly gross income should be about 10 times that minimum wage figure from four decades ago — or about $600 a week.

That sounds like a lot of money — and it is. There were quite a few people who were making at least that much before the recession — but if you've been out of work for a couple of years and your unemployment benefits have run out, you'd probably settle for half that today and be thankful for it.

You wouldn't have much buying power, but you'd probably be able to keep food on your table and a roof over your head.

I long ago got used to the idea that the prices I pay for everything as an adult are higher than the prices that were being charged when I was a child.

But do they have to be so much higher?

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Bad Craziness

When I was a teenager, I was a fan of the Doonesbury comic strip.

I recall reading a strip once in which the Hunter Thompson–inspired character, Uncle Duke, in a clearly hallucinatory state, slumped behind something and muttered, "Bad craziness," while some sort of bizarre creature hovered over where he had stood in the previous frame.

I don't remember the details — and they aren't important, anyway.

But "bad craziness" is what came to my mind when I heard that gas prices have hit a 28–month high.

That is true in spite of the fact that, as Sandy Shore of the Washington Post reports, "[O]il and gas supplies in the U.S. continue to grow and demand for gas is weak."

It's the same through–the–looking–glass sensation I get when I look at the monthly unemployment report.

Earlier this month, we were told that joblessness went down dramatically. But the number of jobs created was not enough to keep up with the growth of the working–age population.

Mathematically, it doesn't add up — until you realize that only the people who are receiving benefits are counted. People whose benefits have expired aren't being counted anymore. They may still be unemployed — and, in this economy, they probably are — but they aren't being counted.

And bureaucrats can congratulate themselves on lowering the unemployment rate — when, in fact, they have done nothing to lower the unemployment rate.

Bad craziness.

Likewise, it is bad craziness for gas prices to be at their highest level since the fall of 2008.

One would be tempted to blame the unrest in Egypt for the price spike. But, as Shore points out, gas prices have been going up since November — predating the revolt in Egypt (which, nevertheless, has contributed to the regional instability that has traders worried about disruption of production and delivery).

And how's this for news? Gregory Karp of the Chicago Tribune reports that prices "aren't likely to go down anytime soon."

Bad craziness.

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