Big Oil went on the defensive this week, being grilled before a House Judiciary Committee antitrust panel. It denied denying accusations that mismanagement and a lack of competition are the reasons behind this spring’s record gasoline prices in the US.
Already there have been four record prices this week. The surge has been attributed to low gasoline supplies caused by a lack of refining capacity.
“They have no interest in building spare capacity because that would undermine their pricing power,” Mark Cooper, research director for the Consumer Federation of America, said prior to the hearing. He later told the panel: “This is a picture of fundamental market failure. And Congress and the administration have stood by and done nothing to help consumers.”
Others at the hearing said Congress should use its power to regulate and even break up the big oil companies if it is found they have violated the law. “There is near unanimity among economists that there is a concentration of power,” said Connecticut Attorney General Richard Blumenthal, who also voiced support for a proposal to sue OPEC for price fixing. The oil companies “have clearly demonstrated that they will abuse it.”
Big oil keeps on harping on “supply and demand”. This is a smokescreen of course as anybody who bought gas in the early 70s can attest to. There was a supply and demand problem then and you stayed in line an hour at a gas station (the few that were open)and received 10 gallons of gas. Today most stations only have a few cars pumping gas at a time with many pumps open. Today the oil monopoly “supplies” the gas and “demands” whatever they want for that gas. Of course with the blessing of the present administration and even apparently the present congress.
It’s a bit encouraging that Congress is at least holding hearings on high gasoline prices and the causes thereof, but experience suggests that hearings will have essentially no effect on current or future prices. The Bush Administration surely will not take any significant antitrust actions against the responsible oil companies, and in any event antitrust actions are unlikely to provide price relief for consumers in the foreseeable future. I would be interested to see legislation which would establish a government-sponsored refinery that could kick into the market with substantial additional refining services when a given supply-demand factor is exceeded in the market (and later kick out of the market if and when the shortage of refining services disappears). Of course this would be a “socialist” measure, but then isn’t that what Bernie Sanders is supposed to be propounding? Not, I fear.