Ron Paul on Gas Prices

Ron Paul
Texas Straight Talk

What Congress Can Do About Higher Gas Prices

July 31, 2006

Gasoline prices are soaring and the American people are angry. They want something done about it—now!

$100 rebate checks to American motorists won’t cut it, nor will mandatory mileage requirements for new vehicles. Taxing oil profits will only force prices higher. But there are some very important things we can do immediately to help.

First: We must reassess our foreign policy and announce some changes. One of the reasons we went into Iraq was to secure oil. Before the Iraq war oil was less than $30 per barrel; today it is over $70. The sooner we get out of Iraq and allow the Iraqis to solve their own problems the better. Since 2002 oil production in Iraq has dropped 50%. Pipeline sabotage and fires are routine; we have been unable to prevent them. Soaring gasoline prices are a giant unintended consequence of our invasion, pure and simple.

Second: We must end our obsession for a military confrontation with Iran. Iran does not have a nuclear weapon, and according to our own CIA is nowhere near getting one. Yet the drumbeat grows louder for attacking certain sites in Iran, either by conventional or even nuclear means. An attack on Iran, coupled with our continued presence in Iraq, could hike gas prices to $5 or $6 per gallon here at home. By contrast, a sensible approach toward Iran could quickly lower oil prices by $20 per barrel.

Third: We must remember that prices of all things go up because of inflation. Inflation by definition is an increase in the money supply. The money supply is controlled by the Federal Reserve Bank, and responds to the deficits Congress creates. When deficits are excessive, as they are today, the Fed creates new dollars out of thin air to buy Treasury bills and keep interest rates artificially low. But when new money is created out of nothing, the money already in circulation loses value. Once this is recognized, prices rise-- some more rapidly than others. That’s what we see today with the cost of energy.

Exploding deficits, due to runaway entitlement spending and the cost of overseas engagements, create pressure for the Fed to inflate the money supply. This contributes greatly to the higher prices we’re all paying at the pump.

If we want to do something about gas prices, Congress should greatly reduce federal spending, balance the budget, and eliminate regulations that interfere with the market development of alternative fuels. All subsidies and special benefits to energy companies should be ended. And in the meantime let’s eliminate federal gas taxes at the pump.

Oil prices are at a level where consumers reduce consumption voluntarily. The market will work if we let it. But as great as the market economy is, it cannot overcome a foreign policy that is destined to disrupt oil supplies and threaten the world with an expanded and dangerous conflict in the Middle East.

It is good to see that our one friend in Congress understands what inflation is. Most people still do not have a clue.

I have to disagree about $20 per barrel oil though. It seems Ron Paul is forgetting about a little thing called "Peak Oil". Demand is rising worldwide, and supplies are falling. In that scenario oil prices are bound to rise. Yet, a rise caused by normal market forces (supply/demand) as opposed to throwing money around will not have anything to do with inflation.

As Ron Paul suggests, the market if left alone will provide a solution. It always does. When the Government interferes with market forces things happen, and they are always bad. Supposedly our invasion of Iraq would "pay for itself" in lower gas prices. Well not only did it not pay for itself we wasted close to a half trillion dollars in that sinkhole and the flow of oil out of Iraq is only half of what it was before we invaded. We also started a civil war. Even the most optimist administration supporter can no longer deny that truth. Many unforeseen consequences of our meddling in Iraq have not even been felt. They are coming.

Ron Paul is not the only one asking for troops to be pulled out of Iraq.

John Murtha

Following is a letter from John Murtha, Ranking Member, House Defense Appropriations Subcommittee to the president.

Dear Mr. President:

While the world has been focused on the crisis in the Middle East, Iraq has exploded in violence. Some 6,000 Iraqis were killed in May and June, and sectarian and insurgent violence continues to claim American and Iraqi lives at an alarming rate. In the face of this onslaught, one can only conclude that the Baghdad security plan you announced five weeks ago is in great jeopardy.

Despite the latest evidence that your Administration lacks a coherent strategy to stabilize Iraq and achieve victory, there has been virtually no diplomatic effort to resolve sectarian differences, no regional effort to establish a broader security framework, and no attempt to revive a struggling reconstruction effort. Instead, we learned of your plans to redeploy an additional 5,000 U.S. troops into an urban war zone in Baghdad. Far from implementing a comprehensive "Strategy for Victory" as you promised months ago, your Administration=' strategy appears to be one of trying to avoid defeat.

Meanwhile, U.S. troops and taxpayers continue to pay a high price as your Administration searches for a policy. Over 2,500 Americans have made the ultimate sacrifice and over 18,000 others have been wounded. The Iraq war has also strained our military and constrained our ability to deal with other challenges. Readiness levels for the Army are at lows not seen since Vietnam, as virtually no active Army non-deployed combat brigade is prepared to perform its wartime missions. American taxpayers have already contributed over $300 billion and each week we stay in Iraq adds nearly $3 billion more to our record budget deficit.

In the interests of American national security, our troops, and our taxpayers, the open-ended commitment in Iraq that you have embraced cannot and should not be sustained.

Rather, we continue to believe that it is time for Iraqis to step forward and take the lead for securing and governing their own country. This is the principle enshrined in the "United States Policy in Iraq Act" enacted last year. This law declares 2006 to be a year of "significant transition to full Iraqi sovereignty, with Iraqi security forces taking the lead for the security of a free and sovereign Iraq, thereby creating the conditions for the phased redeployment of United States forces from Iraq." Regrettably, your policy seems to be moving in the opposite direction.

This legislation made clear that Iraqi political leaders must be informed that American patience, blood and treasure are not unlimited. We were disappointed that you did not convey this message to Prime Minister Maliki during his recent visit. Reducing the U.S. footprint in Iraq will not only give the Iraqis a greater incentive to take the lead for the security of their own nation, but will also allow U.S. forces to be able to respond to contingencies affecting the security of the United States elsewhere in the world.

We believe that a phased redeployment of U.S. forces from Iraq should begin before the end of 2006. U.S. forces in Iraq should transition to a more limited mission focused on counterterrorism, training and logistical support of Iraqi security forces, and force protection of U.S. personnel.

Additionally, every effort should be made to urge the Iraqis to take the steps necessary to achieve a broad-based and sustainable political settlement, including amending the constitution to achieve a fair sharing of power and resources. It is also essential to disarm the militias and ensure forces loyal to the national government. Finally, an international conference should be convened to persuade other governments to be more involved, and to secure the resources necessary to finance Iraq's reconstruction and rebuild its economy.

Mr. President, simply staying the course in Iraq is not working. We need to take a new direction. We believe these recommendations comprise an effective alternative to the current open-ended commitment which is not producing the progress in Iraq we would all like to see. Thank you for your careful consideration of these suggestions.

It is time for the people of the US to demand our troops come home. The quicker we admit we are the problem and not the solution, the quicker a solution will be found.

Ron Paul has it right. If we invade Iran, we might see gas prices as high as $6 or even $10, overnight. Yet this administration that has not done a single important thing right in six years, somehow wants to rattle the cage in Iran, Syria, and Lebanon.

If we want to do something about gas prices, Congress should greatly reduce federal spending, balance the budget, and eliminate regulations that interfere with the market development of alternative fuels.

That last sentence says it all. Brazil even offered to sell ethanol to the US at prices 35 cents a gallon cheaper than current US prices. We foolishly turned them down. Instead our policy involves corn subsidies although corn is one of the least efficient ways to produce ethanol.

It is time for government to get out of the way and stop wasting trillions of dollars we do not have in places like Iraq. It is also time to wasting countless billions of dollars building bridges to nowhere in Alaska, and on failed programs like "affordable housing". The ownership society is a complete failure as implemented. The best way to promote ownership is to get out of the way and let the market do the work.

Government can get away with these things only because the voting public allows it.

It's long overdue that we take back America from the war mongers, big spenders, and bureaucrats who only know how to do two things: waste taxpayer money and wreck havoc on the world. Write your Congressmen and let them know exactly how you feel (even if you feel differently than I do).

Mike Shedlock / Mish
http://globaleconomicanalysis.blogspot.com/