Market Contradictions: Gas Prices and Gassy Claims

By May 30, 2007Energy, Global Warming

What is it again that Blogger Emeritus Pat Cleary calls Washington Post columnist Robert Samuelson? Resident wise man? In any case, Samuelson once again gets to the heart of a matter in today’s column, “A Full Tank of Hypocrisy.” In it he points out the inconsistencies coming out of certain Washington circles: Angry protests against high fuel prices — conspiracies! profiteering! gouging! — from those who insist we must fight global warming by conserving energy.

Guess what: These crowd-pleasing proclamations are contradictory. Anyone fearful of global warming should cheer higher gasoline prices, because much higher prices represent precisely the sort of powerful incentive needed to push consumers toward more fuel-efficient vehicles and to persuade the auto industry to produce them in large numbers. Bravo for higher prices!

Perish the thought.

Samuelson also punches holes in the argument that the oil companies have so concentrated refinery capacity that they can manipulate production to push up prices and profits.

Testifying last week before the congressional Joint Economic Committee (JEC), Michael Salinger, an FTC economist, said that the industry’s concentration levels remain “low to moderate.” According to JEC figures, ConocoPhillips is the biggest U.S. refiner, with 13 percent of capacity; the six largest have 61 percent of capacity. The oil industry is less concentrated than the auto industry, which is considered intensely competitive. As for the absence of new refineries, that problem preceded the merger wave by many years; the last major U.S. refinery was constructed in 1976. There must be some other explanation (environmental restrictions, past low profitability).

And environmental restrictions contributing to past low profitability. (Salinger’s testimony at the hearing is available here in a .pdf file.)

Thing is, we wager many (we hope not most) members of Congress when reading Samuelson’s column would say to themselves, “Yes, well. All that’s true. But it’s easier and better politically to pound the table than to explain, much less address, the policies that contribute to high gas prices.”

Perish the thought.