ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Thursday, May 11, 2006

Gouge This

The open house over at the WSJ is closed, so if you want cool content like this, get a subscription! Here are some highlights:

The Real Gas Gougers
May 11, 2006

Perhaps the explanation is an outbreak of mad cow disease on Capitol Hill. Last week the House of Representatives expressed its collective outrage over high gas prices by voting as a herd, 389-34, to make gasoline "price gouging" a federal felony.

Uh-oh... this doesn't sound good. Why do I have the feeling that this is purely an election year ploy that will have disastrous economic effects for us all? Why do I have the feeling that Bill O'Reilly, pinhead that he is, is partially to blame for this?
Really. This command and control legislation reads like the kind of law passed by the old Soviet Politburo. If an oil company is found guilty of charging a "grossly excessive" price for gasoline, it could face a $250 million fine and its executives face imprisonment. Even neighborhood service station owners could be sentenced to two years in jail and a $2 million fine for the high crime of charging too much at the pump.

One small problem is that no one in Washington can seem to define what constitutes price gouging. Under the House legislation, the bureaucrats at the Federal Trade Commission would define a "grossly excessive" price and then, once prosecutors charge some politically vulnerable target, juries across the country would decide who's guilty and who's not. A Senate version, sponsored by Maria Cantwell of Washington, contains terms like "excessively unconscionable price increases" and "a gross disparity" between the normal price and the price during a shortage or an emergency.

If all of this seems hopelessly vague, the heretofore sensible Joe Barton, head of the House Energy and Commerce Committee, explains that "we know price gouging when we see it. . . . We're here to put the gougers out of business . . . or behind bars." If this works at all like the malpractice tort system, with deep pocketed oil companies pitted against widows and orphans, look out.

Yep, we're all toast. It's been nice knowing you folks! But I think we'll all become much too familiar with the environmental impact of horsepower (if you know what I mean) if we let the tort lawyers after big oil.

I'm sure John Edwards, never one to shy away from a fight - especially when there's millions to be made from a dubious claim - is considering dropping his "Two Americas" schtick to stake out gasoline stations so he can start his class action database.

"Excuse me, Ma'am. Do you feel like you've just been gouged? Thanks, sign here and we'll contact you!"

This editorial is great... and I would provide it in its entirety, but here's just the last few paragraphs:
If service stations are guilty of extortion because their prices are rising more than their costs, then are we to have pricing police preventing homeowners from selling their houses for two or three times what they bought them for, or movie theaters from charging $6 for popcorn that costs 25 cents to produce, or Barbra Streisand from commanding a $1 million fee for a single performance? Now that Republicans have surrendered to the political expediency of price controls on big oil, they won't have much standing to stop Democrats from imposing price ceilings on pharmaceutical drugs, school supplies, medical equipment, and the like.

The irony here is that if there is any extortion or swindling going on in the oil marketplace, Congress is the guilty party. It is Congress that ordered service stations across America to switch last month to ethanol additives that have both raised prices at the pump and exacerbated shortages in recent weeks. It is Congress and state governments that take 59 cents a gallon on average of fuel taxes at the pump -- almost six times the average of 10 cents per gallon profit that the oil companies make.

When the House had a chance to take a positive step to increase gasoline supplies and lower prices last week by making it easier for oil companies to expand their domestic refinery capacity -- Northeastern Republicans teamed with Democrats to bring the measure down. The U.S. now consumes 21 million barrels of oil a day but has a refining capacity of only 17 million. As usual, the loudest Congressional complainers about high gas prices voted as a bloc to keep supplies precariously low.

The headlines for this legislation makes for great politics. And a Bush veto writes its own headline for the MSM: "Bush Vetos Gasoline Gouging Bill. Poor and Minorities hurt the most."

But this is only because the American people often fail to think beyond stage one of any issue involving economics (and, doesn't every issue have some economic ramification?) and the MSM is too eager to ignore the economic realities of such legislation. Either that, or the MSM is just as stupid... which is probably the more likely explanation.

If my local station is gouging its customers, by let's say, charging $3.20 per gallon when the average rate at competing gas stations is $2.80, what do you think would happen? People would simply go to the station charging $2.80 per gallon, which will result in the "gouger" to lower his prices to attract business.

Now, if there is collusion between the stations - something which has never been alleged - then, that's a different story. However, that's already a prosecutable crime.

Your Co-Conspirator,
ARC: St Wendeler