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Click here to return to Bill Wood's Blog Pages.Not Another KerryThe laws of supply and demand tell us that when you make a product cheaper, you get people to buy more of it. Conversely, when you make it more expensive, you get people to buy less of it. Depending on the nature of the product, the change in demand may be immediate or gradual, based upon the ease with which consumers can adjust their consumption of the product. But sooner or later, when the real price of a product goes up, the demand will be reduced.These economic laws certainly apply to a commodity like oil. Keep the price of motor fuels low and consumers will be much more willing to buy larger, less fuel efficient vehicles. Make the price high enough and consumers will adjust their consumption by changing their driving habits and by buying cars that get better mileage. In the decade following the Arab oil embargo of the early 1970's, America took significant steps to reduce its reliance on oil by increasing efficiency and reducing consumption. Most of the momentum from that era has dissipated in the face of the low gasoline prices that prevailed until a couple of years ago. In Europe, where gasoline taxes have been high for many years to encourage conservation and fuel efficiency, gasoline is over $7 a gallon today. In America, the last presidential candidate to propose a national gasoline tax as a means of helping to promote conservation was John B. Anderson. That was 1980 and he proposed a measly fifty cent increase in the tax. Of course, no such increase was ever imposed. The consequence is that today about 60% of the oil we consume comes from foreign sources compared with 33% in 1973. Our nation is now engaged in a painful war against terrorism. Our enemies are, in large part, financed by some of the nations we and other western nations now depend on for oil. Most notable among these is Iran which President Bush recognized as a key player in what he defined as an “axis of evil” in his 2002 State of Union address. While the US does not currently import oil directly from Iran, because oil is a fungible commodity, an increase in the US demand for foreign oil increases the global demand. This in turn increases the world price of oil and, as a consequence, the price and/or the quantity of the oil which Iran is able to sell. Now along comes Lieutenant Governor Kerry Healey who hopes to be the next governor of the Commonwealth. Her current television ads suggest that her primary political objective is the suspension of the State’s gasoline tax. If you think through the economics of what she is saying, Mrs. Healey is actually proposing that drivers here in the Bay State should buy more gasoline, not less. And that means sending more profits to Iran and her neighbors in the Middle East. Perhaps the reason Governor Romney hasn’t signed on to this proposition is his understanding that America shouldn’t be helping to build up of the treasuries of our enemies such as Iran when America’s young men and women are dying on the battlefields in neighboring Iraq and Afghanistan. Can the Commonwealth afford a governor who doesn’t understand economics or global politics? Can the Commonwealth afford Kerry Healey? |
