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Thursday, March 03, 2011

SBE Council Economist Comments on Gas Prices and Public Policy

Today, Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following statement on rising oil and gasoline prices.

"According to AAA's Daily Fuel Gauge Report, the average price for a gallon of regular gas today was up 20 cents compared to a week ago, by 33 cents versus a month ago, and 73 cents higher compared to a year ago. For good measure, a new Rasmussen Reports survey found that a striking 58% of voters expect prices at the pump to top $5 per gallon by the start of summer.

"Obviously, the recent increases in gas prices and grim expectations for the near term tie back, in part, to unrest in the Middle East generating fear and uncertainty. But there's more at work in the price mix.

"First, it is critical to understand that oil is priced in dollars, and the Federal Reserve continues to play a risky game, with unprecedented monetary expansion threatening to ignite inflation. This, no doubt, has played a role in rising oil prices. Keep in mind that the price of oil increased notably from mid-September to late December, before protests spread in the Middle East.

"Second, it is worth noting that the Rasmussen Reports survey also found that 76% of voters believe that the U.S. is not doing enough to develop domestic gas and oil resources. That's absolutely correct. Policymakers need to open up oil and natural gas resources currently off-limits to exploration and development in, for example, the Outer Continental Shelf, the Arctic National Wildlife Refuge and the Rockies, while also removing barriers to and allowing for expanded Marcellus Shale natural gas development.

"While the U.S. will never be completely energy self-sufficient in a global economy, it is critical that we develop our own resources, and that we do not undermine consumers, entrepreneurs, small businesses and this economic recovery with policies that raise the costs of energy."

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