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  • Psst! Washington! Gas Prices Are Still High

    As Americans across the country gear up for Memorial Day, they have welcomed the recent dip in gas prices. Although gas prices are down nearly 20 cents per gallon from one month ago, the average price in the United States remains uncomfortably high at $3.68 per gallon. AAA projects Memorial Day travel will be similar to that of 2011, slightly increasing by 1.2 percent.

    The news, really, is that these high gas prices aren’t news anymore. Consumers have grown accustomed to $3.50 or $4 per gallon on the signs at gas stations, as long as the prices aren’t consistently spiking upward. This becomes problematic when it allows policymakers to put gas prices on the back burner, because these currently high prices are draining the wallets of millions of Americans and are taking a toll on businesses that have to pass the costs on to consumers or absorb the costs.

    In a recent Small Business & Entrepreneurship Council poll, 40 percent of small businesses responding said they have had to increase their prices. Consumer demand is already down, and passing the costs of higher energy prices to consumers will suppress demand even further, causing lower output, lower income, and higher unemployment. A new study by Bankrate, Inc., found that nearly 60 percent of Americans cut back on spending in 2012 because of high gas prices.

    The other option for businesses is to absorb the costs. In an attempt to shield loyal customers from higher prices and maintain their consumer base, many businesses are absorbing the higher costs. For instance, Lorne Campbell, owner of the Washington, D.C.-based bakery Occasionally Cake, has seen supply costs increase 10 percent to 12 percent over the past year while delivery costs have doubled. Yet Occasionally Cake has not raised costs since opening in 2009: “A small business is about personal relationships,” Campbell says. “It’s about trust.”

    Absorbing costs has a rippling effect as well. Squeezing profit margins thinner is preventing Campbell and other small business owners from hiring more workers, and instead, they are asking current employees to take on additional responsibilities or fewer hours. Moreover, many small businesses, family-owned farms for example, are price takers. Because the price is set by the market, these farmers have no choice but to absorb the costs; consequently, profits and investments shrink, and the economy suffers.

    Either way, higher fuel prices tighten the economic vise and hold back job creation.

    America’s policy response to high oil prices is not as efficient as it could be, largely because the energy economy is far from a market-oriented one, and Washington reacts only when gas prices climb upward.

    Whether gas prices are $1.50 per gallon or $3.50 per gallon, policymakers need to open access to energy resources, reduce onerous regulations in which the costs exceedingly outweigh the benefits, and remove energy subsidies for all energy sources and technologies. This will directly create jobs, help lower prices, and create the regulatory certainty needed to jumpstart America’s economic engine.

    Posted in Featured [slideshow_deploy]

    5 Responses to Psst! Washington! Gas Prices Are Still High

    1. Pragmatic says:

      To put things in perspective: http://www.bloomberg.com/slideshow/2012-05-12/hig

    2. Bob says:

      I learned a long time ago that the powers that be were going to do what they could to do anything but they're job. That included making as much of a fortune for themselves as humanly possible. There is really nothing wrong with that capitalist idea unless you doing it off the backs of the tax payers at their expense. That is niggardly behavior at best, immoral and vary unethical. So having said that i learned in 1981 that no less than .25 cents per gallon of all gasoline sold in the U.S, is split between the senate and congress. That is a big chunk of cash every week. As of 1994 with the passing of NAFTA it became .62 per gallon. So the last thing these mutts want is law of any kind unless it benefits them! VOTE THEY'RE BUTTS OUT 11/06/2012!

    3. Stirling says:

      Obamanomics at work.. Prices would go down under a "normal" economy that has not been tampered with by the administration's EPA agenda. If we get a new president in charge watch the prices drop like a rock.

    4. Bobbie says:

      With energy independence and competition in America excluding all unconstitutional special government interests, the costs would drop below $1.50 with other utilities dropping just the same! This intentional drive to crisis has got to stop! They're mandating smart meters on people that take responsibility in paying their bills while we're still charged more so others don't have to be responsible in paying their own! How is that FAIR?

      • Pragmatic says:

        There's a global market for oil. Even if we were operating at the levels to provide independence, the private oil companies would sell the oil abroad at the high price. To make you assertion is ignoring the effects of the global market. Also, we already have low gas prices by global standards – largely because of the government subsidies to oil companies. So, if we exclude unconstitutional govt interests, the cost is going to go up even more.

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