When will someone call for an investigation of the oil companies for their latest transgression? In a blatant and unconscionable violation of their responsibility to their shareholders, oil executives are apparently manipulating the market to drive down prices and their own profits.
Why? Perhaps they enjoy the power rush that comes from yanking around such a vast worldwide market. Perhaps they are feeling less greedy this month. Perhaps they grew bored with rising prices. Whatever the reason for the drop in the price of gas lately, it cannot simply be a product of the forces of the free market — at least not if we remember the rhetoric of Democrats just a few months ago.
Back then, Democrats issued thunderously stupid denunciations of oil executives for engineering the price increases, and blamed the Bush administration for not doing anything to stop it. In May, Senate Minority Leader Harry Reid declared that “the nation’s eyes are focused on the big-oil companies’ greed and enormous profits,” noting that “the oil companies blame international tension and demand, and then increase their prices. I blame the Bush administration.”
Of course he did. House Minority Leader Nancy Pelosi, naturally, cited “the Cheney Secret Energy Task Force.” By their lights, the Bush administration must have done yeoman’s work the past few weeks, taking the average price of a gallon of gas from a high of more than $3 to $2.40. Rather than credit Bush, of course, Reid and Pelosi might want to revert to the economically rational explanation for price fluctuations. As Cato Institute energy expert Jerry Taylor patiently explains for the umpteenth time, the price of gas always increases in the spring, in advance of the surge of demand in the summer driving season, and then declines in the fall, when demand slackens.
This is an entirely predictable economic rhythm. So, with their spring-time demagoguery over increasing prices, Democrats set a trap for themselves in the fall, just as the election heated up. Brilliant. They created their own pro-Bush “September Surprise.”
Not too long ago, the Democrats agitated for an anti-price-gouging law to apply to wholesale-fuel markets, because, in the words of Maryland Sen. Barbara Mikulski, “it is often the large, vertically integrated oil companies that dictate the prices that gasoline retailers can charge.” Note the word: dictate. The large, vertically integrated oil companies must have had a change of heart. Democrats also demanded a windfall-profits tax on the oil companies. If they had imposed the tax, would they give the revenue back, since oil companies are now better behaved?
Behind the decline of the price of gas is the fall in the worldwide price of a barrel of crude. Oil prices had hit nearly $80 a barrel in July, and are below $60 a barrel today. This is the market at work. When prices increase, producers step up their production to make more profits and consumers scale back their consumption. This means more supply and less demand, which translates into falling prices. There also might be a global economic slowdown; there haven’t been any major hurricanes hitting the Gulf Coast; and the U.S. confrontation with Iran is on a low simmer — all factors that reduce demand and ensure a reliable supply.
It is understandable that Democrats couldn’t resist gas-price demagoguery. It was an easy target. But the party is especially inclined to such foolishness in two ways. First, it tends to believe that any unfortunate economic development is a product of malevolent people rather than of the forces of the market. Second, it doesn’t have much of an agenda to run on, so gas-price opportunism seemed a fine electoral platform. “I think the American public on this issue, on this issue alone, may decide the election this fall,” said Connecticut Sen. Chris Dodd.
Oh, well. Democrats will have to find some other economic sector to malign, at least until gas prices increase again next spring.
— Rich Lowry is author of Legacy: Paying the Price for the Clinton Years.
© 2006 by King Features Syndicate