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Gouging Producers
[February 25, 2003]

By S. M. Oliva

With war against Iraq looming, it was only a matter of time before opportunistic politicians launched an attack on oil companies. Today's Washington Times reports that two Democratic U.S. senators and Virginia's Republican attorney general are on a witch-hunt to discover whether oil producers are "price gouging" consumers.

At the outset, it's not clear what price gouging is, or whether it constitutes a crime. Oil producers and distributors have long been at odds with each other over price-related issues. Indeed, it was a complaint from the Virginia Gasoline Marketers Council last year that sparked that state's attorney general, Jerry Kilgore, to launch a full-scale investigation of gas prices in the state.

Nobody denies gas prices have gone up in recent months. But in the normal ebb-and-flow of a market economy, such an event is rarely cause for alarm. Increased production costs, international supply limits, and government regulation all push the price of gas higher. This does not, in any sense, constitute a criminal act. Unless, of course, you subscribe to the school of thought which holds producers guilty anytime consumers are unhappy. That's precisely what's happening here.

Sen. Charles Schumer, New York Democrat, is incensed enough over higher gas prices that he's asked the Federal Trade Commission to open a price gouging investigation. This will likely prove futile, as eight previous investigations of oil producers failed to uncover any evidence of illegal activity. Even the FTC—modern America's version of the Spanish Inquisition—could find no heresy against antitrust doctrine.

Schumer and his colleague Joseph Lieberman—who separately asked the Department of Energy to look into gouging—are simply feeding the beast of consumerism. They operate from a moral philosophy that consumer demand is infallible, while producers are little more than parasites on the economy. This obviously ignores the fact that without producers, there would be nothing to buy or sell in the first place, thus nothing for consumers to complain about. But to consumerists, one can have his cake and eat it too: a bountiful market of goods and services where every consumer wish is fulfilled regardless of the constraints of supply and demand.

Before seeking to blame oil producers for higher prices, Schumer and Lieberman should turn their regulatory armies on themselves. It is regulation of federal energy markets, not the malfeasance of oil producers, that are unfairly contributing to higher consumer prices. California, for example, has some of the strictest gasoline laws in America, in effect banning all gas except one particular brand that meets certain environmental standards. Ironically, the one company that produces this magic gasoline is now facing a federal antitrust inquiry for, get this, monopolizing the California market. As usual, when it comes to antitrust, the deck is stacked so producers lose no matter what they do.

 

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