Wednesday, July 09, 2008

press release: Hill is blowing smoke on gas prices

July 8, 2008


Schansberg: Hill is blowing smoke on gas prices

During recent TV interviews on Louisville's WAVE-3 and Indy's WTHR-13, Baron Hill asserted that speculators in the futures market are causing gas prices to be as much as 50% higher. Hill cited unnamed economists in making this claim.

Eric Schansberg, an economics professor and the Libertarian candidate for Congress in the 9th District, found this incredulous. "I can't imagine an economist making that claim. If it's true, he and Baron should take advantage of their superior knowledge of the market, change their investments, and make a ton of money."

Schansberg continued: "This is doubly frustrating since Baron refuses to debate me on gas prices—after repeatedly demanding a debate on this single topic in May 2006. The funny thing is that he dismissed 'those fancy economists' during our 2006 debate in Jasper [on the minimum wage]."

Schansberg added: "I think he's confused about $2.75 per gallon gasoline. That's about the price we'd have for gas if the dollar had not been devalued since 2002. President Bush and his Congresses (including Baron Hill and Mike Sodrel) bear considerable responsibility for that, given their avid pursuit of government spending and debt.

Beyond the increasing pain at the pump over the last few years, gas prices have been even higher in Louisville and Southern Indiana recently. Schansberg said, "This is probably the result of supply and demand for the particular gasoline required by the EPA. People often imagine that there is a single market for gasoline. But EPA regulations fragment the market into what economists call 'boutique fuels'. This results in otherwise surprising price differentials between counties and greater price fluctuations in these regulated markets."