OMB and the Price of Gas

Astronomically high gas prices and possible post-Katrina price gouging are all over the news these days. So what does OMB have to do with the price of gas? Well, OMB has for some time been living in a fantasy land with regard to what we're paying at the pump. OMB puts out an annual report on the costs and benefits of regulations, and for the last several years the office has been using a low-ball estimate for the price per gallon of gas when calculating cost and benefit estimates. This year and last, OMB used an estimate of -- get this -- $1.10 to $1.30. Of course, OMB could not have predicted Hurricane Katrina or post-hurricane price gouging. OMB still could have done a much better job with gas price estimates: at the time of the report, the government's best guess was for prices above $2.00 per gallon. Why the lowball number--and the failure to correct this obvious mistake after it was pointed out last year by economist Frank Ackerman and law professor Lisa Heinzerling? Nothing makes sense, unless OMB is intending to minimize the benefits from fuel economy standards. For more, see OMB Watch's comments on this year's report.
back to Blog