Economy & Business

Whither the Gas-Price Conspiracy?

(James Hardy/Getty Images)
The only people fixing gasoline prices are politicians.

Whatever happened to the go-juice cartel?

When gasoline prices rise, there is inevitably a great deal of ill-informed and irresponsible talk about conspiracies, price-fixing, “gouging” poor drivers, etc. After a spike in gasoline prices in 2007, opportunistic House Democrats passed a bill that would have empowered the federal government to lock American citizens in prison for selling gasoline at prices that displeased the president. (Clapping people into prison is the unwavering gut instinct of so-called liberals.) When Republicans in the Senate blocked the Democrats’ patently insane plan to — repeat — lock human beings in cages for a decade for selling gasoline at presidentially unapproved prices, the Democrats instantly retreated even farther into conspiracy theory, claiming that corrupt Republicans had sold their votes to Big Oil.

Among the leading gasoline-conspiracy theorists during the Great Gasoline Kerfuffle of 2004 were Ed Markey, who was in the House at the time but has since been elevated to the Senate by Massachusetts masochists, and Frank Pallone of New Jersey, who co-authored a letter (signed by another 51 Democrats) demanding that the attorney general investigate displeasing gasoline prices, which they blamed on “the Bush administration’s cozy relationship with big oil companies” rather than the usual interaction of supply and demand. Apparently, gasoline prices should command the personal attention of the attorney general at least, if not that of the president.

The mind-boggling fact is that state attorneys general from Arizona to Texas to Illinois actively monitor gasoline prices — and, to make sure that everybody knows they’re serious, Illinois refers to its price monitors as the gasoline “SWAT” team. New York State maintains a hotline for the purpose of reporting purported gasoline-price gouging and hands down the occasional fine for selling gasoline at “an unconscionably excessive price” when there is “an abnormal disruption of the market.” (As opposed to a conscionably excessive price during a normal disruption of the market? Ease up on the modifiers, guys.) Filling-station owners in Michigan have been prosecuted as criminals when they ran afoul of politicians’ price sensitivity. Michigan is a state so ill-governed that it managed to lose its largest city, and its urban murder rates are some of the highest in the civilized world — but the prosecutors are right on top of pennies-per-gallon variations in retail gasoline prices.

When he was attorney general, Connecticut’s Richard Blumenthal, now in the Senate, was an absolute lunatic authoritarian on the issue of gasoline prices. If we take him at his own word, he proposed banning profit in the oil industry, calling for an investigation into who is “profiting and profiteering at our expense, so we can stop it.” If the government did indeed put a stop to profiting from the sale of gasoline, what does the genius from Connecticut think would happen to gasoline retailing?

When gasoline prices jumped after the Russian annexation of Crimea, the usual dopes — dopes who, luckily for the likes of Markey and Blumenthal, have the vote — detected the usual conspiracy: “The big gas companies collude and set the prices.” Even George W. Bush fell into that line of thinking, ordering the Federal Trade Commission (no free republic should have a federal trade commission) to conduct an investigation into price gouging in 2006. The FTC’s finding? It was all supply and demand.

But that answer is profoundly unsatisfying to people who do not understand or appreciate the most beautiful and interesting aspect of free markets — that nobody is in charge of them. For these people, somebody somewhere has to be pulling the strings. Never mind the geopolitical situation, never mind the fact that most big oil companies do not even operate retail gas stations (Exxon, for example, does not actually own Exxon-branded stations), that gas stations earn very little money selling gas (soft drinks and cigarettes are where they make their jack), and that the evil rotten Big Oil companies generally make very small profit margins (Exxon makes about 8 cents a gallon on gasoline, less than half of what the federal government collects in taxes on the same gallon), and never mind economic reality: If somebody doesn’t like the price of a gallon of gas, then that price must be unfair and the result of a conspiracy, and if a sufficient number of dopes in elected office believe the same thing, then it must be a crime, too.

So what the hell happened?

Where’s the conspiracy now, when oil prices and retail gasoline prices are plunging? If the goblins in Nancy Pelosi’s head are correct in their insistence that higher gas prices must necessarily be the result of a criminal conspiracy, does it not follow that lower gas prices also must be the result of that same conspiracy? Either nasty wicked Big Oil controls gas prices or it doesn’t. A mind as narrow and uncomplicated as Pelosi’s shouldn’t be that difficult to make up.

Inevitably, the same authoritarian mentality that seeks to police gas prices that are too high also seeks to police gas prices that are too low. George Will relates the sorry story of Raj Bhandari of Merrill, Wis., who brought down upon himself the full force of the state when he committed the crime of giving oldsters a 2-cent-a-gallon discount on gas, and then compounded his misdeed by offering supporters of local youth-sports programs a 3-cent-a-gallon discount. Wisconsin law mandates that retailers sell their gas at no less than 9.18 percent above the price they are charged by wholesalers. (I’ll bet the story of how that precise 9.18 percent figure was arrived at is a fascinating study in political thinking.) Bhandari faced a $2,000-a-day fine and the possible loss of his business for cutting his elderly and community-minded neighbors a break without permission from politicians.

When it comes to raising gas prices, it’s damned if you do and jailed if you don’t.

The thing is, we’re not even supposed to be having this fight. James R. Schlesinger, who served as Richard Nixon’s secretary of defense before becoming the nation’s first secretary of energy under Jimmy Carter — somehow, the republic had managed without one for two centuries — insisted back in 1977 that we’d run out of oil by the end of the 20th century. The “peak oil” enthusiasts — same old Malthusians, different commodity — have been insisting for decades that we’re right on the verge of seeing oil production fall short of demand. Instead, we’re producing so much that prices are crashing:  It turns out that the road to abundance is abundance, i.e. producing more of what people want and need.

And the cartel that actually does try to engage in price-fixing — OPEC — is powerless to do anything about it.

In fact, the only halfway successful price-fixers are the politicians themselves: From gasoline to sugar to milk, there are a great many commodities that would be less expensive if not for politicians. And, as noted, they make more money off a gallon of gas than Chevron does, to say nothing of gas-station owners like Raj Bhandari. And who is really profiteering from the issue? Presumably, Dick and Ed are better off as senators than they were in less exalted offices. Strange how many Democrats grow wealthy in “public service.” I’m sure your average Big Oil CEO lives in a nice house; Harry Reid lives at the Ritz. The oil companies make their money providing a useful product; politicians make theirs standing in the way.

But it wasn’t the politicians who brought down gasoline prices, and it wasn’t a conspiracy, either. And it won’t be a conspiracy that sends them up again.

— Kevin D. Williamson is roving correspondent at National Review.

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