The Tired Obama Attack on Gasoline Prices

By Kennedy Maize

Washington, D.C., May 2, 2011 – The Obama administration’s response to current high gasoline prices is so 1970s…or 1980s…or 1990s…or 2000s. Been there, done that, dead end.

Washington seems to be perfumed with a silliness pheromone that gets loosed in the Nation’s Capital whenever gasoline prices go up. As pump prices climb, every administration going back to Nixon, and every Congress cheerleading or booing from the sidelines, resorts to the same tired ploy. We’ll have an investigation, we’ll get to the bottom of this, we’ll find the miscreants and punish them severely.

Only there aren’t any miscreants, just oil companies passing on prices over which they have no control. In fact, no indictable or renounceable people or institutions have any control over oil prices, and that includes our favorite bugbear, OPEC. Prices are set at computer consoles and on trading floors by so many different actors with so many different ideas about the future that making any sense out of it results in only one thing: a consensus commodity price with which we all must live.

The alternative to this chaotic, volatile oil market is far worse: rationing, either de jure or de facto. We’ve had both – outright rationing by law during World War II, which few are old enough to remember, and rationing by bureaucrats tinkering with markets, which characterized the 1970s and early 1980s. While few remember ration coupons (and I certainly don’t), many more of us (count me in this cohort) remember gasoline lines and odd-even days for buying gas.

Some of us probably even recall the breathless but false accounts in the press – fed by ignorant or venal politicians, most of them members of my Democratic Party – of oil tankers parked just over the horizon, waiting for prices to rise before they pull into dock to unload their crude. To spread the partisan blame around, it was the Republicans and the Ford administration who were too cowed by politics to remove Nixon’s disastrous price controls on crude oil. Those contributed mightily to the gasoline price hikes and gas line that first OPEC and then the fall of the Shah of Iran brought about.

Of course, the cynical among us, and the experienced, know what’s going on here. The idea is to entertain the great unwashed American voters with the flash and dazzle of a good sideshow, while the people in power, who are in truth powerless, sneak out the back, Jack. Make a new plan, Stan. There must be 50 ways to fool the voters.

So Obama has launched another investigation as gasoline prices pierce the somehow magical pump-price ceiling, now standing at $4/gallon. He joins every predecessor in the modern White House, including that scion of the oil patch George W. Bush. Don’t expect any deviation from the politics of blame assignment and ducking from the current crew.

On a related note, many Democrats in Congress and some in the administration are also outraged, outraged, I tell you, about soaring oil company profits. It’s just “obscene” that oil companies make money when people buy their products. That towering profile of political courage, James Earl Carter, gave us the “windfall profits tax.” That worked, didn’t it?

I have no fondness for oil companies, but it doesn’t surprise me, and it shouldn’t surprise you, when they make more money when the price of oil goes up. Remember – see above – they don’t control the price of oil. It is completely unreasonable to expect oil companies to refuse to pass on price increases to their customers, as some of the congressional commentary suggests should be proper behavior. The managers of oil companies, like those of other publicly-traded businesses, have obligations to their shareholders.

More to the point, reducing the cash Exxon-Mobil stashes away under the mattress after costs would not lower gasoline prices to you or me by even a penny.

You may have noticed that many of those solons who seek to force oil companies to disgorge profits are the same folks who decry carbon dioxide emissions from fossil fuels, notably gasoline. How would they reduce CO2 emission from cars and trucks while seizing oil profits? Simple. They would replace oil profits with gasoline taxes, while keeping prices the same and relying on you to shift to other ways to move from place to place. Carbon dioxide emissions would go down. But wouldn’t that be the same as an increase in the pump price, just with the results flowing into a different bank account? You are demonstrating wisdom, grasshopper.

The idea is to lower what oil companies can charge you, increase the tax that government will take from you, and keep prices you pay about the same. So, instead of oil company shareholders getting the benefit of higher oil prices, the government will reap the windfall and spend it wisely on such things as windmills, fast trains, and wars all over the Middle East.

Then the oil companies won’t have money to look for more of those nasty fossil fuels – and prices will go even higher yielding more tax revenues — and all will be well in the wacky world of Washington. Gosh, it looks just like Carter’s windfall profits tax, doesn’t it? Maybe you should consider shifting your investments out of oil company stock.