1. Energy Volatility
Americans are spending more money than ever to put gas in their car, heat their homes and pay their utility bills.
According to AAA, the nationwide average price of unleaded gasoline has consistently has hovered over $3 per gallon in the past few months. In as many as 10 states, the average price of gasoline exceeds $4 a gallon. That is, on average, a dollar higher than last winter and approximately three times higher than a gallon of gas cost in 1999. As a result of these drastic swings in energy prices, the costs, consumers pay for everyday goods has risen substantially over the course of the past several years.
“Energy costs trickle down into every product we buy and every service we consume,” said North Dakota Rep. Kim Koppelman. “There is an often overlooked energy component to every transaction and when energy prices go up, the entire economy is affected. “
Energy volatility, combined with such things as high unemployment and rising health care costs have crippled the American economy. While this is not new, recent volatility in energy prices have placed considerable strain on individual budgets and are limiting both state and federal economic growth.
The causes for this volatility in energy prices are numerous and include some of the following:
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Weather catastrophes, such as hurricanes Katrina and Rita;
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Geopolitical shifts in key oil producing countries; and
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Speculation in energy related markets.
Regardless of the cause, drastic increases in energy prices have impacted the American economy in the past several years. Given the fact that nearly three-quarters of Americans drive to work and that nearly all American business need gas to bring their products to market, consumers have little recourse when prices for oil and natural gas spike.
Even falling energy prices creates a whole new set of unintended consequences for Americans. While falling gas prices on the surface appear to be a good thing, the drastic volatility in energy prices is making budgeting and financial management a significant challenge for individuals and businesses.
Policy Solutions
State policymakers are faced with the challenge of reducing the volatility in energy prices While there is no easy solution, state legislators and executive branch officials might consider various options.
Koppelman called for a balanced approach ” that accounts for environmental and safety concerns, while not limiting production and development.
He believes this could be achieved by facilitating production and energy transmission and distribution through an approach that limits taxation and encourages diversification and production. Koppelman believes energy volatility could be reduced by encouraging domestic production and reducing dependence on foreign oil, which he added would “facilitate supply, stabilize prices, create jobs and stimulate economic growth, all of which have the capacity to reduce energy volatility.”
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