Saturday, December 3, 2005

Now that the gasoline price has plummeted across the country, shouldn’t the Senate committee that berated oil company executives when prices were up now praise them?

If the price of gas can be so easily manipulated by the oil companies, shouldn’t the senators give those corporate execs medals instead of tongue-lashings? Fair is fair.

Think about it: Instead of talking about a “windfall profits” tax to punish Big Oil, shouldn’t senators now introduce legislation to reward Big Oil by cutting its taxes?

Wouldn’t that be logical if populist politicians really believed in the kind of “Through the Looking Glass” economics they propound in congressional hearings?

There’s another way to peer through that looking glass:

What about the millions whose retirement depends on their mutual funds, in which oil stocks are heavily represented?

How many of those pension funds depend on oil companies’ profits, and what happens to those pensions if the profits evaporate? Don’t the pensions shrink, too?

Instead of talking about laws against price-gouging, shouldn’t Congress now hold impassioned hearings, complete with widows and orphans, to ask how it can help increase Big Oil’s income to help those dependent on it? Have these politicians no conscience?

Besides, how can the oil companies build new refineries senators demanded the other day unless their profits increase?

Even now gas prices are below pre-Katrina levels. Unless another hurricane comes and again wipes out two-thirds of the oil production in the Gulf of Mexico, American oil producers will face constantly dropping prices. Deflation stares them in the face, yet no one rides to the rescue. Where’s the U.S. Cavalry?

Worse news could still be ahead: The price of gas, which hovered around $3 a gallon on Labor Day, now has dropped some 80 cents and could dip below $2 a gallon by Christmas. Oh, the humanity. Shouldn’t Congress act before it’s too late? Disaster impends.

Shouldn’t the same editorial cartoonists who not long ago depicted Big Oil as vultures preying on the poor American motorist now be drawing the companies in tatters and rags, the innocent victims of the gas-guzzling American consumer filling his SUV at bargain prices?

One caricature is as fair — or rather unfair — as the other.

Whenever gas prices spike, the resulting outrage gives politicians the perfect opportunity for a little demagoguery. At such times, all kinds of taxes are threatened, demands made, laws drafted and cries cried. The only law ignored is the one that best explains the ups and downs in the price of oil — the law of supply and demand.

As for raising taxes on Big Oil, a favorite political gambit, when Congress enacted a windfall profits tax on the industry in 1980, oil production in this country fell dramatically (of course) and imports of foreign oil rose (of course again). Is that what Congress is trying to do — help out the oil sheiks, or maybe Venezuela’s latest strongman?

If you want to reduce the supply of any commodity — domestically produced oil, for example — just tax it more.

Government is already doing a lot to keep up the price of gas. Across the country, consumers pay an average of 46 cents a gallon in federal and state taxes, but surely could pay more.

There is also talk of a ceiling on the price of oil, i.e., price controls. It’s as if the country forgot the disastrous results of the Nixon era’s price freeze: long lines at fuel pumps and general economic disruption. Nothing exacerbated the oil sheiks’ 1973 boycott like the Nixon administration’s response.

When prices rise again, and they will, some genius will start talking up gas rationing, and again the discussion will produce more heat than light. Overlooked in all the rhetorical combustion will be the realization this country already operates under the most efficient, constantly adjusting form of rationing known to man: the free market.

Paul Greenberg is a nationally syndicated columnist.

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