Gas Prices: Deja Vu-Doo Economics

By April 25, 2008Energy

WASHINGTON, April 25 /PRNewswire-USNewswire/ — Speaker Nancy Pelosi and House Democratic leaders sent the following letter today to Federal Trade Commission (FTC) Chairman William E. Kovacic urging him to investigate record gas prices. The Energy Independence and Security Act of 2007 gives the FTC the authority to probe possible market manipulation of gas prices, but to date, the Commission has failed to exercise its power to protect consumers from skyrocketing energy costs.

The letter’s text is here.

Seems familiar, this line of argument. Very familiar. In fact, why don’t we respond to it by just reposting our post of September 19th, 2007, entitled, “Stop the Presses: Still No Price-Gouging!”

Certain elected officials get months of headlines every other year or so beating up on the people who supply fuel to consumers, claiming that the evil oil companies are manipulating the prices of gasoline. News conferences, congressional hearings, table pounding and news releases — we get the whole spiel. Repeatedly.

But when the FTC issues yet another report showing that higher prices for gasoline resulted from market forces and no gouging occurred, it’s a one-day story. A low-profile story.

Take the August 30th release, with the attention-grabbing headline, “FTC, Antitrust Division Send Report to President on Factors Explaining National Average Gasoline Price Increases During Spring and Summer of 2006.” (August 30th, the Thursday before Labor Day. Almost like the FTC wanted the story buried.) Conclusion: “Market factors explain increases in the national average retail price for gasoline during the spring and summer of 2006…” That is, no price gouging.

We make these observations as a set-up to and praise for Paul Greenberg’s opinion column, “Economics vs. politics.” As usual, Greenberg pulls no punches.

[Every] time gas prices go up, a certain kind of politician is shocked, shocked. Or at least pretends to be. And demands an investigation, which is a lot easier than taking Economics 101 all over again.

Naturally the politician blames some vague, amorphous monster out there like Big Oil rather than the real-life owner-operator of your neighborhood filling station. After all, the little guy votes. If there’s an avaricious cartel setting oil-and-gas prices, it’s called OPEC. But oil sheiks and Venezuelan caudillos are scarcely subject to a congressional investigating committee.

If there’s a conspiracy at work here, it’s the dismal science itself — economics. It has been refuting demagogues ever since they’ve been taking advantage of our anger, suspicion and ignorance.

Thanks for the reminder, Mr. Greenberg.

Trouble is, the demagoguery has left its legislative mark. The Senate passed version of the energy bill (H.R. 6) includes anti-price gouging language, which will discourage companies from responding to the market’s price signals, and inevitably lead to shortages. (Heritage looked at the issue here.) So we need to continue paying attention, just as Paul Greenberg has.

Or expect yet another FTC report, demanded in, oh, August 2008, but only to be finished after the November elections.

Well, April instead of August, but otherwise…

Join the discussion One Comment

  • Insightful thoughts. All too often, politicians spend more time fanning issues away from themselves than sitting down and figuring out what to do about them.

    What are your thoughts about biofuel or other alternatives?

Leave a Reply