- The Washington Times - Friday, September 9, 2005

When Rudyard Kipling said it was a great virtue “if you can keep your head when all about you are losing theirs and blaming it on you,” he was not thinking of Sen. Maria Cantwell, Washington Democrat. This week, as gasoline prices remained above $3 a gallon, she proposed empowering the president to tell retailers what they can charge at the pump.

Many people grew anxious seeing long lines forming last week, as motorists rushed to fill their tanks after Hurricane Katrina. But Miss Cantwell apparently enjoyed the sight well enough she would like to make those lines a permanent feature of the landscape. If so, she has the right approach. The government does many things badly, but one thing it knows how to do is create shortages by vigorous price controls.

That’s what it did in the oil market in 1979-80, under President Jimmy Carter. He was replaced by Ronald Reagan, who lifted price caps on gas and thus not only banished shortages but brought about an era of low prices.

Miss Cantwell thinks oil companies have manipulated the energy market to gouge consumers, though she awaits evidence to support that theory. “I just don’t have the document to prove it,” she declared. Her suspicions were roused when she noticed prices climbed in Seattle — though most of its oil comes from Alaska, which was not hit by a hurricane.

Maybe no one has told Miss Cantwell oil trades in an international market and when companies and consumers in the South can’t get fuel from their usual sources, they will buy it from other ones — even as distant as Prudhoe Bay.

If prices rose in Dallas and didn’t rise in Seattle, oil producers would have a big incentive to ship all their supplies to Texas — leaving Washington state to pay nothing for nothing. When a freeze damages Florida’s orange juice crop, does Miss Cantwell think only Floridians feel the pain?

The senator is clearly not a detail person. Asked what price retailers should be allowed to charge, she confessed, “I don’t know what the level should be.”

Sen. Byron Dorgan, North Dakota Democrat, meanwhile was outraged by the thought giant oil companies were making money merely supplying U.S. energy needs. He claimed they will reap $80 billion in “windfall profits” and wants the government to confiscate a large share of that via a special federal tax.

But the prospect of occasional “windfall” profits is one reason corporations are willing to risk money drilling wells that may turn out dryer than Alan Greenspan’s reading list. Remove profits and investors might prefer speculating in real estate.

Speaking of real estate, Americans seem to feel no moral compunction about getting rich from unforeseen increases in the price of another vital necessity. Do you think home-sellers in Baton Rouge haven’t raised asking prices in the last 10 days? Think Mr. Dorgan wants to tax their windfall?

It’s hard to see why oil companies shouldn’t make a lot of money when the commodity they provide is suddenly in short supply. After all, they are vulnerable to weak profits or even losses during gluts. Back when Americans enjoyed abundant cheap gasoline, the joke was that the surest way to make a small fortune in the oil industry was to start with a large one.

Oil companies are also subject to the whims of nature. No one is holding a charity fund-raiser for the businesspeople whose rigs and refineries were smashed by Katrina. No one will come to their aid if prices drop by half.

Besides, high prices serve two essential functions: they encourage production and conservation. Spurred by the lure of windfall profits, oil companies will move heaven and earth to get more gasoline to consumers. Shocked by the tab when they fill up a 5,600-pound SUV, motorists look for opportunities to leave the Suburban at home. They may even commit a sin not covered by the Ten Commandments: coveting their neighbor’s Prius.

Controlling prices, by contrast, would have exactly the opposite effect: Telling consumers they should waste fuel to their hearts’ content, and telling producers to leave the black stuff in the ground. When world events conspire to make oil dear, there is nothing to be gained from masking that fact. We can ignore reality, but reality won’t ignore us.

Steve Chapman is a nationally syndicated columnist.


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