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Going after price-gouging sounds to me like he'd like to make price-gouging a crime.

Price-fixing might be a crime:

http://business-law.freeadvice.com/trade_regulation/price_fixing.htm

I don't know if that's what Obama means. If it is, being a Harvard-trained lawyer and all, he should say so.

Great column Doug. The first bit of sanity from your paper on the issue. Americans have gotten gotten so used to the "nanny state" or "welfare state" mentality that we are clueless as to how the real world operates. In Belgium they pay 8+ dollars a gallon, in Norway nearly 9 dollars, in Aruba 12 dollars. So count your blessings, and be glad you live here, and not only because of the cheap gas!

The oil companies net profit on a gallon at $3.50 a gallon is about $0.33 per gallon. Governments (federal and state) rake in (atleast here in NC) $0.48 per gallon, and do not produce a single drop of oil or gas! Yes, we're being gouged, but not by Exxon!

I'm waiting for the pol who suggests we start selling gas by the liter, like they do in the rest of the world. That way we could immediately drop the price to less than $1 at the pump.

Last summer, Congress came close to passing a federal law against price-gouging including a provision that would have allowed the DOJ to sue OPEC if they were engaged in price-gouging (currently not allowed by law). The measures were opposed by the White House and did not become law.

Does OPEC set prices or set supplies, which of course determines prices on the world markets? If they cut production, or don't raise it to meet demand, prices rise. Could we sue them to make them increase production?

Maybe we should just "go after" individual OPEC members ... like Iraq? Oops, already did that.

Iran?

Venezuela?

Aha! Kuwait.

I see, you're all for "going after" when it means sending people to die. Go it.

Tony, how many roads and bridges has Exxon, et al built and maintained? You forget that Exxon gets to pocket that $0.33/gal whereas the state and federal governments put their ~$0.48/gal right back into the roads you drive on every day.

The main proponent of rising gas prices, in my opinion, is inflation and the devaluation of the dollar. Since that is what oil is traded in worldwide, of course the price goes up... why? Because it becomes cheap for other nations to buy. The only reason it's *still* more expensive in the UK and pretty much all of the EU is because of their social programs, mass transit systems and generally higher taxes. I'd honestly hate to see what the British government's take is on a gallon of fuel on their side of the pond.

Roch, sorry, now I don't get it. I was just wondering what the U.S. government could do to control the price of OPEC oil.

Sensei, good points. I wondered why gasoline cost more than $4 a gallon in Tanzania two years ago: There aren't much in the way of social programs, mass transit, etc. Maybe just government officials with deep pockets.

Here, obviously, we need transportation infrastructure, which needs a funding source. Undoubtedly, much of the revenue isn't spent effectively. That's certainly the case in North Carolina. But that's not a reason to eliminate motor fuels taxes.

The house passed a bill last year that "would change antitrust laws so that the Justice Department can sue OPEC member countries for price-fixing, and would remove the immunity given a sovereign state against such lawsuits."
http://www.cbsnews.com/stories/2007/05/22/politics/main2840033.shtml

Hillary's news release of April 28

http://www.hillaryclinton.com/news/release/view/?id=7354

included this item:

"Pressuring OPEC to increase oil production, including by filing a WTO complaint against OPEC countries" ...

so I guess she'll on a similar track.

I don't understand how lawsuits or WTO complaints can force a country to increase production of something it doesn't want to produce more of.

Could Haiti go to the WTO and demand it force the United States to sell it more food at lower prices? Even if we agree for humanitarian reasons that we ought to do that, as a matter of principle would we let another country and an international agency dictate to us like that?

Doug:

Thanks for your clear thinking!

Best regards,

Paul Daniels

"I don't understand how lawsuits or WTO complaints can force a country to increase production..."

They wouldn't. They would enforce a penalty for collusion.

Just read the editorial. I guess giving the cash-strapped taxpayers a tiny amount of relief is too much to ask for, huh?

Taxpayers are getting an income tax rebate, which is probably all the give-backs the government can handle given all its commitments.

I should add that our governor, who robo-called my house Saturday, is going to tout HRC's federal gas-tax break he should not oppose the same for the N.C. gas tax. I guess he knows we won't get much highway work done without any money.

Let me note once again, as I have on other N&R blogs, that the most likely outcome of a "gas-tax holiday" is ZERO reduction in the price of gasoline. So it's not about "giving the cash-strapped taxpayers a tiny amount of relief," because there will be no relief.

Producers are going full-bore already (the economics lingo is that short-run supply is highly--and possibly perfectly--inelastic), which means that eliminating the 18.4 cent federal tax will just create more demand and bid the price right back up to the starting point. Instead of sending that 18.4 cents per gallon to the federal government, we'll be sending it to the oil companies.

The end result: no relief for consumers and increased profits for oil companies. If that's what Clinton and McCain are going for, then it's a great idea.

Thanks, Andy. I'm with you, but ...

Has demand for gas dropped since the last 18 cents per gallon hike in prices? If not, it seems demand would not increase if the price at the pump suddenly dropped by 18 cents. The price will still be too high to encourage people to go out and drive more than they need to, right?

That might be true if gas was an impulse buy. But for the vast majority of people, it's a necessity, like food, housing, etc. We need to buy gas to go to work, drive to school, go to the grocery store, etc. We don't have a choice about going to the gas station.

Besides, I hardly think a temporary 18-cent drop in prices is going to lull drivers into going hog wild at the pumps. The price still will be well over $3 a gallon.

Again, a gas tax holiday would simply give taxpayers a small measure of relief during a difficult stretch. Is it a solution for America's energy problems? Of course not. But it might help everyone's pocketbooks just a little.

And Doug, the problem is that the federal government simply has too many spending commitments. It needs to both cut spending and return some money to the taxpayers.

The government is returning money. My wife and I have $1,200 coming. I'm all for it. I'm not going to ask for more in the form of a gas-tax cut for the summer.

The government can give back more later AFTER it cuts wasteful spending, not before.

That last sentence didn't come out right. Of course, the government should cut out wasteful spending now. But that probably won't eliminate the deficit.

The government is returning money....

************

Yes, thanks to President Bush and his supporters. The liberals don't like that one either, I'm sure.

And if all of these local bonds and sales tax options pass, Doug, you and your wife will quickly give that $1,200 back to the government.

Doug, I'd disagree with that. And yet it's not because demand HAS dropped since the last 18-cent increase in the price of gasoline (which happened over what, the last month?). The very fact that demand HASN'T dropped is why we should expect to see no change in the price of gasoline if this silly "holiday" is put in place.

We can't talk about demand without mentioning supply. Did the last 18-cent price increase lead to greater supply? I don't think so, and the more I read about the current state of the oil industry, the more I'm convinced that there are a number of short-run structural impediments to supply price responsiveness. It appears that the oil industry is going full-bore, and price increases just help its bottom line. To be sure, in the longer run, rising prices will induce more investment, exploration, etc. But in the short run (which is all that's relevant to a discussion of a three-month gas-tax "holiday"), it appears that supply quantities are basically set.

Even though gasoline prices are highly dependent on what goes on in regional markets (defined in part by stringent and regionally disparate federal rules on emissions, and hence on gasoline formulations), they are also strongly determined by global events, including the global demand for oil. That demand has continued to rise, and that's the main reason for the price increases we've watched with mouths agape.

Right now, supply and demand are roughly in balance. Eliminating the federal tax for a while will temporarily reduce price. But taking global demand into account, demand will exceed supply and we know what that leads to. Normally, price would rise upward to some point that's still below the starting point. But with supply so unresponsive to price changes, this particular tax reduction will push price right back up to the starting point.

Thanks again, Andy. Let's see if the politicians ignore the economists (like that's never happened before) and proceed.

A quasi-anthropological explanation of pandering:

Ages ago, primitive man sat at his campfire and tried to figure things out. When events became too complicated to ascribe to easily understood causes, he devised supernatural explanations.

There's little difference between primitive man trying to figure out the heavens and modern man trying to understand rising gasoline prices. The causes of the latter are complex, and both local and global in scope. And so modern man devises his own explanations. They may not be supernatural, but they're just as unreal.

And so we have the ogre of price gouging, much hated but never actually observed. Then there's the excessively profiting oil company, which of course profits from the current situation but did little or nothing to make it happen. Ditto for OPEC, because whatever collusion that organization tries to foster has been swamped by the unprecedented surge in global oil demand.

It was hard for primitive man to understand that sometimes crappy things, whether a storm or an earthquake or a famine, just happen. It's equally hard for modern man to accept the same thing.

Oops, I hit Post before adding the final sentence:

And this is what makes modern man so susceptible to pandering politicians.

I recommend you don't go into politics.