Welcome to June 2000, the month in which new federal gasoline regulations
have come into effect for a third of the country. The mandate that some
cities sell reformulated gasoline caused market supplies to drop, just at
the time when gasoline demand increased for summer travel.
No surprise, gas prices soared to over $2 a gallon in Chicago, where the
new regs hit the hardest. Everywhere, prices are reaching above the $1.65
range, a post-Gulf War high. It’s the government’s way of making sure that
this summertime, the livin’ won’t be easy.
During the winter months the Clinton administration worried more
intensely about the high price of oil. A few months back, when prices were
last spiraling upward, there was some concern about low-income families in
the Northeast not being able to heat their homes. Gas prices also took a
jump so Congress began talking about repealing Clinton’s 4.3 cents tax on
But fortunately for the White House, super-cold weather never
materialized, so all talk of reducing artificially inflated prices by any
means ceased. More decisively, someone told the Republicans that repealing
the Clinton gas tax would mean that Congress would have less money to spend.
They thought about that, and quickly changed their minds.
But now that summer is here, and oil prices are up again, there’s no more
concern about poor people shivering their way through winter; in summer, the
only people harmed are middle-class vacationers driving gas-guzzlers –
archetypical real Americans — and who cares about them?
And yet, consumers want answers and the government is glad to give them,
even when it means telling outrageous lies. “We think the prices that are
being charged are unfair and inappropriate,” Robert Perciasepe, an assistant
EPA administrator, told the press, just before summoning oil producers
before the DC Politburo.
We know that no institution is in a better position to discover and
punish unfair and inappropriate behavior than the Clinton administration.
You merely compare the cost of production of gas to its price. If there’s a
problem, you conclude, as has the monstrous Energy Secretary Bill
Richardson, that there’s something wrong with the market. In the tradition
of “when did you stop beating your wife,” he said in a CNN interview: “Is it
collusion or is it price gouging? We need answers to those questions.”
Here’s your answer, buddy: it’s the misnamed Energy Department! (And
permit me a small technical point about the relationship between cost and
price: accounting costs are historical data, while prices always reflect
present forecasts of the future that may or may not be right. There is no
fixed relationship between the two in the real world.)
It’s all very nice and easy to pick on the working-class folks who go to
the trouble of extracting the oil, turning it into gasoline, and delivering
it to your neighborhood station for you to buy. When you are looking for
someone to blame in these times, it’s always easiest to blast the
businessman. No calumny, no matter how implausible, is too far-fetched to
pin on capitalism. The press plays along, with most reporters failing even
to mention the new regulatory mandates, or any of the other impositions that
are driving prices sky-high.
Actually, when you consider all the government conspiracy to drive gas
prices up, it’s a wonder and a credit to free enterprise that they are not
up to $5 a gallon by now. Most importantly, there are the taxes, which today
account for at least 32 percent of the pump price of gasoline. According to
the American Petroleum Institute, gasoline taxes average over 41 cents per
gallon. Gas taxes zoomed 100% in the 1980s, and 54% in the 1990s.
Oil producers today are treated very poorly by the government. Besides
being among the most heavily regulated sectors, a percentage of all revenue
from oil produced on socialized land must be forked over to the federal
government in the form of royalty payments. And the Clinton administration
is trying to make that payment more egregious by increasing it without
regard to the terms of the leasing contract.
This policy is consistent with the restrictions put on drilling and
leasing. The US is home to rich oil lands in Alaska and offshore, to which
oil producers are denied access. The excuse is the environment, but that
can’t be the real reason; oil producers long ago learned to make themselves
virtually invisible as they work to put nature to man’s use. For the
government, high prices are their own reward.
Senate Majority leader Trent Lott says he will push for legislation to
open up some lands in Alaska for drilling. He might even send out a few
fundraising letters on the subject. But we know how this will end. He’ll
shmooze with a friends-of-the-earth-type lobbyist and table the whole idea
in a few weeks’ time. Why do they tease us so? And why do we pretend to go
The protectionist menace is also a factor in high gas prices, and here is
where the Republicans are really bad. It’s been ten years since the Gulf War
and trade with Iraq is still seriously restricted. Opening full trading
relations would not only break the back of OPEC; it would immediately
unleash millions of barrels of oil and cause prices to plummet. But for all
the talk about the merits of free trade, this is not even being considered.
Repealing any one of these interventions would bring prices down to less
than one dollar. But what if we repealed all of them? What if taxes were
wiped out, crazy regulations repealed, oil lands opened up, and free trade
established with Iraq? Gas would be plentiful. What the price would be — 75
cents? 25 cents? — would be anyone’s guess. Many refineries would go out of
business, of course, but new ones would pop up. The market economy would
find the right price for gasoline and we’d never worry again about the high
price of gas.
But the Clinton administration, and the greens behind all these bad
policies, have a different idea in mind. Their model, for now, is Germany,
where an “ecology” tax has driven the price of gasoline to $3.85 per gallon.
No more joy rides and traveler freedom. Just taking a Sunday drive means
spending a week’s earnings. And the citizens are in a fury over it, with 60
percent of those polled demanding a repeal of the tax.
What are the effects of policies designed to deliberately drive up the
price of gas? Everything that involves transportation has gone up in
Germany. Not just air fares, but also the price charged for school trips,
locksmith visits, and rent-a-cars. Even the price of having a pizza
delivered is up by 25 to 50 cents. Drivers are struggling to provide
consumers a great perk of the capitalist economy: having a pizza delivered
to your door.
It’s crucial to remember that these are not side effects — or unintended
consequences — of bad policy. A high price for gas is the policy. Less
driving and less consumption generally is the goal. The real ideal is Mao’s
China, where the entire population crowded the streets with bicycles and
gasoline powered only public transportation, the bureaucracy, and the
military to enforce the edicts of the commissars. The left reminisces over
these scenes and thinks: look at the wondrous conservation of resources that
communism made possible.
Toward Germany and Mao’s China is where the Clinton administration would
like to take us. The response might be: well, it hasn’t killed Europe and US
prices are still cheap by international standards. But there’s a huge
difference. With the vast amount of space in this country, efficient travel
is essential to prosperity and a high quality of life. But try to explain
that to ghouls who have deliberately brought about high prices and then lied