Blame outrageous gas prices on big oil companies, which must be stopped by government price controls.

That’s the essence of a controversial bill passed by the Democratic-controlled House last week. “The Consumer Fuel Price Gouging Prevention Act? is the party’s response to gas prices hitting new records across the country.

The makes it a crime to sell gas at “unconscionably excessive prices during an energy emergency.” The measure gives the president and the Federal Trade Commission new powers to penalize.

“The real problem with increased gas prices is gouging and monopolies,” Senate Majority Leader Chuck Schumer (D-N.Y.) said last week.

“Corporations have price gouged consumers for extra profits—and gotten away with it—for too long,” added Sen. Elizabeth Warren (D-Mass.)

And the House bill’s sponsor, Congresswoman Kim Schrier (D-Wash), tweeted “At a time when people in my district are feeling the pain of high prices at the pump, Congress needs to be doing all we can to bring down costs.” The measure is another attempt to use government action to impact high prices by allowing President Joe Biden to declare an emergency and then set prices.

So will it work? Most economists say no. And they point to the price control disasters of the 1970s. Indeed, many energy industry experts say the bill gets the problem backward. It’s government action — most notably restrictions on production and refining petroleum — that goose up prices.

“We don’t really believe in price gouging. We think there are market shortages when demand spikes up. It is a natural. When there’s anticipation of a greater demand for a product, more people will drive up the price,” says Tom Giovanetti, president of the Institute for Policy Innovation. He adds prices are rising because new supply “has been restrained.”

The anti-gouging bill would make things worse for consumers, complains Thomas Pyle, president of the American Energy Alliance. The Biden administration “has taken repeated action to suppress and prevent domestic oil and gas production. Now these chickens are coming home to roost as American families face rising energy prices at the pump.”

Giovanetti says oil companies are also cutting back on production “because woke bankers, applying Environment, Social and Corporate Governance (ESG) standards, are denying them new financing.”

And what about giving the president the power to declare an energy emergency and put a cap on price hikes?

On Aug. 15, 1971, as oil prices were rising, Nixon declared in a nationally televised address, “I am today ordering a freeze on all prices and wages throughout the United States.”

After a 90-day freeze, increases would have to be approved by a “Pay Board” and a “Price Commission,” with an eye toward eventually lifting controls after the 1972 election.

William Walker, who served as deputy director of the federal Cost of Living Council from 1972 to ’74, says the scheme failed.

“The administration slapped a freeze on beef prices, but ranchers retaliated by withholding cattle from slaughter, and meat disappeared from store shelves. It declared an embargo on exports of soybeans to avert an impending shortage. Nothing worked,” Walker wrote in The Wall Street Journal.

Still, the anti-gouging bill has political, if not economic, appeal, says Mark Thornton with the Mises Institute.

“It portrays the government as doing something about high fuel costs when in fact the government is responsible for high fuel prices. It can be harmful to business and consumers in the short run and once on the books could be used in some future green campaign to eliminate gas stations in favor of electric cars.”

Thornton says the lower gas prices of two years ago can be restored without price fixing.

“Energy prices could come down with policies similar to those of the previous president. I would say go all out for fossil fuels and let power companies open coal plants and start new nuclear power plants. Create a tax credit for investment to turn natural gas into LNG (liquified natural gas).”

Ending the war in Ukraine, he adds, could also reduce prices by increasing supply.

Gregory Bresiger writes about financial and economic issues for InsideSources.com.

(5) comments

pxllr

Corporate profits are at all time record highs. Prices are rising at record levels. Maybe there is a correlation there?

phxnative54

This op-ed - yet another hysterical right-wing screed that WMI sources from "InsideSources.com", who often publishes factual information that utilizes loaded words (wording that attempts to influence an audience by using appeal to emotion or stereotypes) to favor conservative causes - is so full of bovine excrement that it's hard to know where to begin to straighten out the misinformation.

First, "the government" isn't restricting oil/gasoline production. The U.S. is the world’s largest producer of crude and the largest consumer as well. The U.S. has been among the top three oil producing nations since 2000. In fact, the U.S. has been the world’s largest producer since 2012. There are thousands - if not tens of thousands - of oil leases languishing in the U.S. and not being drilled. Why? Because oil companies are drowning in record profits from the high prices and don't want to lower those prices by increasing supply. Companies could continue to begin new drilling operations on unused leases at the current rate for at least the next 10 years without access to any new leases. Despite the industry’s “sky is falling” claims, federal oil and gas development is unlikely to change substantially with a pause on new leasing because the industry already has access to so many acres of public lands.

Second, "the government" doesn't set oil prices. Oil is a global commodity and as such, its price is determined primarily by global supply and demand. When supply is greater than demand, prices fall. Demand plummeted during the Covid pandemic and oil companies cut back supply accordingly. Demand surged back to almost pre-pandemic levels but - guess what? - oil companies didn't increase production accordingly, causing increased prices and higher profits. The Russian war on the Ukrainian people also resulted in decreased world supply, as nations cut off imports of Russian oil that is funding their war.

Third, one of the sources cited - Thomas Pyle, president of the American Energy Alliance - is a mouthpiece for the oil industry itself. The AEA and the political arm of the "Institute for Energy Research," which is often described as a front group for the fossil fuel industry. It was initially formed by Charles Koch, receives donations from many large companies like Exxon, and publishes a stream of reports and position papers opposing any efforts to control greenhouse gasses. Not exactly an impartial source.

Fourth, another source cited in the op-ed is the Mises Institute, which a report by the Southern Poverty Law Center (SPLC) in 2000 categorized as Neo-Confederate, "devoted to a radical libertarian view of government and economics." In 2003, Chip Berlet of the SPLC described the institute as "a major center promoting libertarian political theory and the Austrian School of free market economics," noted [original academic vice president of the institute Murray] Rothbard's disgust with child labor laws, and wrote that other institute scholars held anti-immigrant views. Austrian economist Steve Horwitz called the Mises Institute "a fascist fist in a libertarian glove." Yeah, another great source.

Next, oil corporations HAVE price gouged consumers for extra profits. Are they using those profits to increase production? NO! They are using them to do massive stock buybacks and pay out huge bonuses to their executives (the same ones who pocketed more than $10 billion in COVID-19 relief payouts while working families were hit hard by the pandemic.) Mr. Bresiger conveniently failed to mention that little tidbit in his piece.

The real problem? One word: Greed.

Joe101

Interesting how inflation was under control, lots of jobs, and a secure border when Trump was President. One word: Competent!

ronzim

What is really needed in a windfall profits tax on the fossil fuel industry.

Joe101

Maybe you are wrong!

Maybe more drilling, open federal lands for oil like in Alaska, and less stimulus $$. Maybe reduce spending. Maybe DeDantis!

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