Via the AP: Bush Orders Probe Into Gas Price Cheating

President Bush is trying to calm Americans’ outrage over soaring gas prices by ordering an investigation into whether the price of gasoline has been illegally manipulated, his spokesman said Monday.

[...]

Bush’s actions are part of a four-part plan to address gas prices in the short- and long-term, McClellan said. The steps McClellan outlined are:

1. making sure consumers and taxpayers are treated fairly;

2. promoting greater fuel efficiency;

3. boosting gasoline supply at home;

4. aggressive long-term investment in alternative fuels.

First, of those four, only the first is a sort-term response, and it is the one least likely to do much of anything about supply or demand–which is the only way that there will be serious effects on price.

Second, I am hardly happy about the gas prices, but my word, have we not been down this road before? Every time prices soar, politicians feel the need to “do something” (or at least appear to look like they are doing something) to bring the price down. Has there ever been proof of serious price gouging in one of these stories? I don’t think so, yet every time we hit a high price, the price gouge business comes out.

Third, do I think that oil companies try to squeeze every penny they can out of favorable market conditions and seek to increase their profits? Of course, but then what business doesn’t? Oil companies aren’t social institutions, they’re businesses, and as such, their behavior it both quite predictable and quite comprehensible.

Fourth: yes, insanely high retirement packages for Exxon-Mobile executives are bad public relations, and I must confess, I don’t enitrely understand it. However, I do know that that has very little, if anything, to do with $3.00/gallon at the pumps.

The WSJ editorial board weighs in (Denny Pelosi: Gas prices rise, and Republicans panic) and notes both the politics of desperation and the following:

For the record, the FTC has an entire crew that pores over weekly average gas prices in hundreds of cities, looking for evidence of gouging–to no avail. Perhaps this is because no oil company controls enough of the market to exercise enough power to raise prices. The Hastert-Frist call for an investigation is nothing but short-attention-span political theater.

Beyond the ethanol fiasco, the oil markets are once again providing a tutorial in supply and demand in a global commodity market. Strong economic growth from the U.S. to China is driving up demand, even as political uncertainty in oil-producing countries such as Venezuela and Iran is leading to supply worries and some speculation. The Federal Reserve has also played a role by flooding the market with dollar liquidity that has produced higher prices across all commodity markets.

2 Comments

1. Fourth: yes, insanely high retirement packages for Exxon-Mobile executives are bad public relations, and I must confess, I don’t enitrely understand it. However, I do know that that has very little, if anything, to do with $3.00/gallon at the pumps.

   I think it might to the extent that the bad PR can’t hurt them. If you assume that the money in exectutive pay would go to lower prices instead (a dubious assumption, I think) and are angry about it…well, you still have to get to work. The pressure on them not to look like jerks isn’t all that strong. They’ve got folks over a barrel, so to speak.

   Comment by Deb — Tuesday, April 25, 2024 @ 4:35 pm

2. Indeed.

   Comment by Dr. Steven Taylor — Tuesday, April 25, 2024 @ 4:38 pm

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