Gouging – even the word sounds frightening.
These days, there’s been a near-unanimous call for the public to be outraged over price-gouging at gas pumps around Denver.
Well, I’m not outraged, and you shouldn’t be either.
Here in Colorado, as elsewhere in the nation, high gas prices have generated hysterical, populist rhetoric from those who’ve forgotten the fundamental principles of supply and demand.
“Gas-price gouging is not illegal under Colorado law, and we think it should be,” Colorado Speaker of the House Andrew Romanoff recently claimed.
I’m not sure what Romanoff meant by “we” – I would like to be excluded – but anyone who believes gouging is a concern will really have something to complain about if shortsighted price controls are implemented.
This week, Romanoff promised to pressure the state attorney general and the Public Utilities Commission to “investigate” the problem and “combat” gouging.
It’s going to be difficult to “combat” the irrefutable fact that fuel supply is down and demand is up. And really there is nothing to investigate, unless you believe in conspiracy theories.
Hurricane Katrina destroyed 12 percent of the nation’s refining capacity. This fact, coupled with rising demand from nations such as India and China, has put a tremendous demand on oil – a fungible global commodity.
Price controls bring lower fuel prices and increase demand. But when demand is outstripping supply, we can all look forward to shortages and lines.
Fact is, gouging is a myth. It’s called making a profit.
“For many Americans outside of the Gulf Coast, the immediate impact of Hurricane Katrina isn’t looting in the streets, it’s looting at the pumps,” says “Looting at the Pumps,” a release by CoPIRG, a public-interest advocacy group.
I spoke to Rex Wilmouth, state director of CoPIRG.
So, was there gouging in Denver?
“We were seeing the prices go up in four or five days from 60 to 70 cents,” Wilmouth explains. “Our take on it is this: We looked at how much money the oil industry was making and how much they were posting as profit; we were astounded that they felt the need to increase the price of gasoline in the time of a natural disaster.”
Wilmouth, no doubt, is well-intentioned. He will apparently do anything to save us from the evils of Big Oil – except actually learn about the oil business.
“Last week, the stock prices of major U.S. oil producers ExxonMobil, ChevronTexaco and Conoco-Phillips have surged,” he tells me as part of a long harangue about the success of Big Oil.
It took me a few minutes to comprehend that this was supposed to be bad news. Millions of Americans own oil stock – shouldn’t we be happy for them?
I mean, higher gas prices mean increased stinginess on the part of the consumers at a time of low supply, right?
Isn’t that positive?
Don’t Americans have alternatives? A consumer can decide to travel less, take public transportation, or buy a fuel-efficient car or drive to a cheaper station.
Hybrids, Wilmouth understands. As you can imagine, he is very excited about hybrids.
Now, Romanoff and Wilmouth are entitled to espouse that government should have the authority to dictate the price of products in the free market.
But then, why stop at oil?
Today, for instance, a quick calculation revealed I had shelled out around 8 bucks a gallon for my bottled spring water.
But that’s nothing. Last time I went to see a movie, I paid approximately $200,000 a gallon for soda – I’d need an infinity sign to calculate the per-pound price of popcorn.
Or how about this?
Why don’t Colorado and the federal government cut or suspend the 40-50 cents we pay in taxes on each gallon, depending on where you live?
Funny, with all the concern for consumers, no one’s proposed something that would actually help them.
David Harsanyi’s column appears Monday and Thursday. Reach him at 303-820-1255 or dharsanyi@denverpost.com.
