I find it interesting to eavesdrop on conversations about the price of gasoline in the U.S. Then there are the news items (that I don’t read in detail since they are only reporting on political mudslinging) about which political party is responsible.
Gimme a break–as they used to say. There are times where a confluence of consumer behavior, events in other countries and global economic factors come together like when the Ohio River at flood stage dumps into the Mississippi River at flood stage, joined by the Missouri River, Tennessee River and so on.
Try this line of reasoning–Americans cannot give up their love affair with driving large vehicles for long distances at high rates of speed plus the Chinese are now discovering that same love plus the drop in the relative value of the dollar.
[Don’t forget, some people benefit from the low dollar (manufacturers and farmers who export, for example) while others suffer. Happens with all economic tinkering, I think.]
The policy part–and unintended consequences–comes from the extra political power the agriculture lobby has due to the 2-Senators-per-State part of the U.S. Constitution. When you take the number of Senators from states with lower populations that are dependent upon agriculture and compare to the number of Senators from oil-producing states, you get agriculture-benefitting legislation.
Case in point, we support farmers and (supposedly, ha!) cut our consumption of petroleum through tax breaks for ethanol production coupled with mandates for ethanol added to gasoline. This is a government mandated increase in the price of corn. This leads to higher food prices for consumers–the unintended consequence.
Check out this article in The Wall Street Journal (if you have a subscription, which I just got), “C. Larry Pope: It’s Getting Harder to Bring Home the Bacon.” It’s an interview with the CEO of Smithfield, a huge pork products producer where he explains why his mom can’t afford to buy his bacon.
