The Oil Conspiracy Conspiracy

For some time now, California politicians and bureaucrats have been searching for some evidence of an oil company conspiracy, something that would explain the rising price of gasoline.

They have come up with nothing.

But in the spirit of “never give up locating a scapegoat,” now it is Congressional Republicans who are setting out on the search.

And why not? Have they anything really useful to do? (Oh, if we could only get back to the age when Congress spent merely a few weeks each year in the nation's capitol!)

Why do gasoline prices rise? Because either supply is shrinking or demand is increasing. And indeed both of these are happening as we speak.

Because of the efforts of environmental lobbyists, no new refineries have been built in the United States since 1972. Nor have any new wells been dug, even though there are many regions of the country with plenty of oil to be extracted.

But the alarmists in the environmental movement — often with enthusiastic support from the alarmists in the mainstream media — have made sure that no additional supplies of oil will be forthcoming.

Then there is the increase in demand. The Chinese are improving their standard of living due to the recent state-sanctioned semi-capitalism that’s enabling millions of Chinese to become entrepreneurs with well-paying jobs.

Elsewhere, like in India, Pakistan, and even in parts of Africa — not to mention many of the former Soviet bloc countries — there is now a rise in living standards because of more competition in the service industry and this, too, is leading to rather significant increases in travel.

So the demand for gasoline has been rising considerably, without any corresponding rise in the supply.

The Middle East, which, through decades of geopolitical craziness has become a hotbed of nationalized oil production — with a corresponding politicization of the oil industry — isn’t helping any of this. On the contrary, oil has become a potent weapon for them to use against the West.

Understanding all this doesn’t require much expertise, only a little bit of attention to national and international news reports — perhaps a bit beyond what one can glean on CNN and other sound-bite news networks.

Yet there is also another matter to be recalled in connection with the current laments about high gasoline prices: Oil prices actually aren't all that high.

Although the mainstream media has failed to report it, many economists have pointed out that Americans are spending about the same percentage of their income on gasoline today that they did in the late 70s and early 80s.

Sure, the absolute numbers are higher. But that is not what counts — not if one wants to understand whether gasoline and other prices have undergone unusual, abnormal increases that suggest some kind of industry conspiracy.

Here is further proof, which doesn't require any costly and time-wasting Congressional inquiry: People speak louder with their wallets than with their voices.

So Americans are still merrily purchasing huge, gas guzzling cars, SUVs, boats, and so forth, thereby giving support to the conclusion that they aren’t hurting as much as they make out when they complain to some shallow news reporter who takes their complaint as decisive evidence for how bad things are getting.

So, yes, not only are gasoline prices not that high, all relevant things considered, but their rise is fully explainable by plain commonsense economics and politics.

These beltway politicians who are about to embark on a witch hunt should find something productive to do with their lives and leave the oil companies to do the same.

No doubt there is a lot more to the politics and economics of oil, but hunting for scapegoats is definitely not going to help.