Posted by Steven Hayward
George Will gets it right on "energy independence," as usual, but in this case he’s especially on the right track because he cites . . ., well, me.
It takes a lot more ability to conduct an orchestra than to play a saxaphone-- advantage Bush!
Well, let's see, it's been what, three or four years since gasoline prices spiked? And in all that time my libertarian friends have told me that "the market would equilibrate." New fields would be discovered and exploited, new refineries would be built...all spurred by higher gas prices. But you know what, Steve...I've yet to see much progress. True market competition doesn't exist in the oil industry, and the price of entry is exhorbitant. What real motivations do the "oligopolarchs" who utterly control this production system have to loosen up the tight supply-demand market? Seems to me, all they would achieve is less-than-record profits by increasing supply.
Whatever the case, I'm tired of hearing about the "inflation-adjusted" costs of gas, or the excuse du jour for higher and higher prices. What I notice is the exhorbitant profits, which strongly suggests that things are real good for the oil companies, and they have very little motivation to change things. It takes "little guys" to spur "big guys" to lower prices, and there ain't no "little guys" in this market (none that matter much, anyway).
I think you're being shortsighted here. While record profits might, as you assert, suggest that things are "real good for the oil companies", you're not seeing the other side.
By ignoring "inflation-adjusted" costs vis-a-vis 1981, you're missing that things have been "real good for the American Petroleum Consumer" for 25+ years.
This isn't a libertarian argument. The fact is, the price of gasoline has risen lower than the rate of inflation in the last quarter century. This means that in other markets, costs have risen faster than inflation; I would challenge you to start railing against the profiteers in those other markets.
As technology improves, prices are supposed to fall. This isn't about scarcity, this is about a decision the oil industry made back in the late 1990s. They knew that demand, which has been monotonic for the most part, would put existing fields and refineries under strain, and they chose to do nothing about it. Five years ago the average price for a gallon of gasoline was about $1.15...we have seen a tripling in that short time. So, who has been shortsighted here? Or is it a market strategy that is somewhat less than consumer-friendly? At minimum, this industry is guilty of gross incompetence in meeting the needs of our nation (but truly ingenius in lining their own pockets, true enough).
As the old Southern phrase goes, "Don't p... down my neck and tell me it's rainin'." Gasoline is not a normal good, it is a vital commodity. It doesn't come in flavors or styles, and most of us don't have much choice in whether to buy or not. There is very little pricing competition. Other such commodities of this type are regulated, such as electricity, water, and natural gas (at least in some States). I think the time has come to do the same with petroleum. It is dumb to expect normal market mechanisms to correct the problem when 80% of the world's oil is controlled by national-states (not private companies) and our own oil industry is clearly an oligopoly.
And, yes, it is mostly libertarians who argue for a laissez-faire petroleum market. Only they have the blind faith necessary to overlook plain facts and expect their god, mammon, to save the day. But only political solutions are likely to work here.
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