by Richard J. Grant
A sure sign that a politician is floundering is when he resorts to blaming those mysterious “speculators” for some price moving in an unpopular direction. President Barack Obama is merely the latest head of government to attempt to deflect public attention onto an abstract scapegoat. But even in the unlikely event that he understood the implications of his call, last week, for Congress to adopt tougher regulations against speculators in the oil markets, he can't distract us completely from his own role in the misdirection of speculation.
Ironically, were President Obama less inclined to centrally plan our lives, the price of oil would not be a political issue at all. In those countries most-free from central planning, the prices of most goods tend to fall and incomes rise. We are better able to acquire more goods and services for every hour that we work. The case against the Obama administration is that it is limiting systematically our ability to organize our own lives to increase production and raise our standards of living.
This limitation is especially glaring in those industries, such as the energy industry, that have received special attention from the administration. It is as if the president just can’t reset his Marxist default switch that leaves him in constant temptation to “seize the commanding heights” of industry.
If the president had striven to reduce government involvement in the energy industry, other than its proper function of enforcing property rights, he would now be immune to accusations of blame for higher energy prices. Not only would the price of gasoline and other related prices not be a remarkable issue in our lives, the energy industry would now be more free and confident to expand supplies. It would also be free to innovate and expand into truly promising alternative energy sources, such as nuclear power, which has been hampered by superstition rather than science and by the resulting regulations that have unnecessarily driven up its costs.
Instead, in the name of “green energy,” the Obama administration has plunged into activities about which it knows little. It has encouraged companies to speculate, notably with taxpayers’ money, on technologies that hold little promise for the near future.
In the real world, speculators invest with their own money and, if they are wrong, lose their own money. They have an incentive to correct their mistakes. But in Obama’s world, the mistakes continue until they run out of taxpayers’ money.
The recurring energy crises of the 1970s were not the result of any physical limitation on energy supply. They were the direct result of heavy and misguided government regulations on the production and transportation of fuels and on the implementation of energy-related projects. Even the much-dreaded OPEC was nothing more than a cartel of governments that not only had trouble policing its own members’ production levels, but was ultimately no match for freer markets. When the newly arrived Reagan administration acted to deregulate the markets, the term “energy crisis” was relegated to the past.
Our problem is not a lack of “energy independence,” but a lack of independence from government interference. It is an interference that drains resources from those best-suited to use them wisely and directs them into the speculative dreams, and pockets, of the politically connected.
When speculators foresee higher gasoline prices, it’s a symptom, not the cause, of our problems.
Richard J. Grant is a Professor of Finance and Economics at Lipscomb University and a Senior Fellow at the Beacon Center of Tennessee. His column appears on Sundays.
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Copyright © Richard J Grant 2012