Demagoguery Hits $3 a Gallon

By May 11, 2007General

Here’s a story from today’s WaPo about the demagogue-o-rama triggered by the recent spike in gas prices. Now they’re lining up to blame “big oil” in spite of the fact that most gas stations are mom and pop operations. No matter, might as well hit “little oil” too, right?

Of course all of this ignores the most basic law of all, that of supply and demand. If Congress understood that one, they’d not be running down blind alleys like the so-called “windfall profits tax” idea and they’d be opening up US resources to exploration. Increased supply is the only way to meet this problem in the short term.

And, just in case anyone think that windfall profits tax is a good idea, the last time it was tried it had disastrous results. Here’s a fact sheet on the topic. Something about the market responding to disincentives. Maybe Congress ought to bone up on that one, too.

UPDATE (By Carter Wood, 9:30 a.m.). Hey, what’s Cleary still doing around here?

Anyway, this seasonal-affect disorder is disheartening indeed, in that the politicians understand full well that what we’re seeing is the laws of supply and demand at work. You can influence the price of gas by decreasing demand or increasing supply, not by imposing price controls or mau mauing the producers (unless you want shortages).

John Felmy, chief economist at the American Petroleum Institute, testified this week to the new House Committee on Energy Independence and Global Warming. He provides the clearest, most straightforward explanation of the many we’ve seen about what’s going on in the oil industry. Every politician on this price gouging kick should read the testimony and respond to the FACTS, the facts Felmy lays out. Skip the rhetoric, just tell us if you accept the facts as explained by Felmy. And if not, what is your contrary evidence?

Outstanding testimony. You can read it here.