Who is to Blame for Rising Fuel Prices – Government
Who is to blame for the rapid rise in fuel prices?
In a market free of government and monetary intervention, prices rise when demand increases beyond the capacity for production. Conversely, in such a market, prices fall when supply exceeds demand. Demand is dictated by consumer needs and desires. In each transaction, a consumer decides to purchase something that will bring them more value than the money they are required to pay. This circumstance doesn't change for any product, be it a necessity or not.
In the market for fuel, consumers are given some choice in where and how they spend. Those choices are dictated by availability as well as need. For example, consumers who commute through mass transit are far less likely to spend any money on gasoline than are those who commute by automobile. Consumers desiring greater freedom of mobility will choose those methods of travel which suit their needs. These consumers will be more willing to spend greater amounts of money on the fuel needed to achieve those desires. In a free market, the price of fuel would reflect the intersection between its availability and the demand for it based on the needs and desires of the consumer.
In the U.S., it is supposed that we have a free market. This is not the case. If we did, the price of fuel would reflect fluctuations in demand and availability. Since demand didn't suddenly increase in the last year, and availability hasn't dramatically declined, we have to look at other potential causes.
Businesses in the U.S. have developed through innovation and consumer demand. Both the automobile and fuel industries are examples of this. When these industries rise, they do what is necessary to survive. They develop products and services that will be in demand. They also streamline production and distribution to ensure the greatest return for their investments. In the end, it is in a company's best interest to offer the best possible product for the lowest possible price. In a free market, this would be the extent of business development. However, in the U.S., businesses have another means through which they can maximize profit: government legislation and regulation, also known as protectionism.
The practice of protectionism is one method employed by businesses to limit entry of competition into the marketplace. They cannot, however, utilize this method without the government being complicit in the process. Businesses lobby government officials, both elected and appointed, to create laws and regulation which inhibit competition. The stifling of competition insulates businesses from the need to keep prices low. Since protectionism requires government complicity, the influence that this activity has on price must be blamed on government.
However, this is not the only reason that government is to blame for the rapid increase in fuel prices in the U.S. Another means of creating power and influence exercised by governments is through monetary policy. As the U.S. economy slipped into recession on the heels of the collapsing housing bubble (caused by legislation aimed at making housing “affordable”), U.S. monetary policy sought to cushion the blow through currency expansion. Inflation of the currency is meant, by those who practice it, to allow for an ever expanding economy that will alleviate busts. Unfortunately, currency expansion does little but cause prices to increase. Fuel, is one of those prices directly impacted by the inflation of the currency, again strengthening the case that the rise in this particular price is caused by government.
