SBE Council Chief Economist on Gas Price Hardships and Solutions

On May 20, the Associated Press reported that a new poll showed that 71% of Americans said high gasoline prices will cause some hardship for them and their families, with 41% calling such hardship "serious." Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following statement:

"You can add small businesses to the list of those feeling the pain of high prices at the gas pump. Whether filling up the tank or simply using goods and services affected by the price of gas, very few small businesses are not negatively impacted.

"Understanding the reality that prices are affected by unrest and uncertainty in places like North Africa and the Middle East, what would help from a U.S. policy standpoint? First, the Federal Reserve has been running historically loose monetary policy for over two-and-a-half years now. That has translated into a decline in the value of the dollar, and a rise in inflation and inflation expectations. Since oil is priced in dollars, part of the rise in the price of oil is clearly linked to faulty U.S. monetary policy. Get monetary policy focused on price stability, and that would be a clear positive for energy prices.

"Second, U.S. energy policy clearly works against more energy exploration and development. Bans on both offshore and onshore energy development need to be removed, and the EPA must be stopped from moving ahead with greenhouse gas emission regulations. After all, prohibitions on developing various energy resources and the EPA's regulatory efforts send clear signals to energy firms and investors to move away from, for example, investments in oil exploration and refineries. Markets are forward looking, and therefore, these anti-production actions by government exert upward pressures on prices. Pro-energy production policies would work in the opposite and positive direction."