Liberally Conservative

"Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children's children what it was once like in the United States where men were free....... ~Ronald Reagan~

Tuesday, April 25, 2006

Oil Price Panic - Republicans Take The Lead

House Speaker Dennis Hastert, (R-IL) and Senate Majority Leader Bill Frist, (R-TN) urged President Bush in a letter Monday to order a federal investigation into any gasoline price gouging or market speculation. White House spokesman Scott McClellan said Bush had already done so, but had not revealed it publicly.
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Senator Arlen Specter (R-PA) wants to go further and impose stricter "antitrust" laws for oil companies, as well as a "windfall profits" tax.
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Playing election year politics and following the polling numbers is ignoring free market economics. Congress has created some of the problems by its own hand.
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Discussed on the Journal Report on FOX this weekend and The Wall Street Journal reports today:
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Congress's passed legislation taking care of the ethanol lobby that forces drivers to use 7.5 billion gallons annually of that oxygenate by 2012. At the same time, Congress refused to provide liability protection to the makers of MTBE, a rival oxygenates getting hit with lawsuits. So MTBE makers are leaving the market in a rush, while overstretched ethanol producers (despite their promises) are in no way equipped to compensate for the loss of MTBE in the fuel supply. Ethanol is also difficult to ship and store outside of the Midwest, which is causing supply headaches and spot gas shortages along the East Coast and Texas. As recently as last year, ethanol was selling for $1.45 a gallon. By December it had reached $2 and is now going for $2.77. So refiners are now having to buy both oil and ethanol at sky-high prices. In short, the only market manipulation has been by politicians.
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The politicians are ignoring the facts of global supply and demand. Investigations of price gouging have been done before to no avail. This current act of congress with Bush's support is nothing more than election year politics, while ignoring economics.
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The switch from MTBE to ethanol has created refining problems and has artificially created supply issues in the short-term. Prices will begin to decline but insufficiently enough to satisfy consumers during the summer months. Republicans, once again, have mismanaged their majority and will pay the price, not at the pump, but at the polls.

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