This bill—which has little chance of passing the Senate—is both cynical and revealing.
Besides being cynical, the anti-price gouging bill is very revealing.
The demagogues who voted for it are at war with the inexorable, unrepealable law of supply and demand. The average American understands that gasoline prices are soaring and oil company profits are rising because supply isn’t keeping pace with demand. The politicians who voted for the price-gouging bill prefer to blame greedy oil executives rather than impersonal market forces for higher prices and profits. This raises an important question: If all oil companies have to do to maximize profits is restrict supply, why don’t they do that every year and avoid horrendous years like 2020 when they lost billions of dollars?
There are two realities about the oil market that elude those who voted to punish alleged price gouging: It’s highly cyclical and brutally competitive.
This year’s healthy oil company profits are the result of a still-young upturn in the cycle after the 2020 bottom. Many oil company leaders are hesitant to boost exploration spending now, partly because of how much money they have lost in recent years and partly because they perceive the Biden administration’s zealous anti-oil beliefs.
Not only has the administration been canceling pipelines and leases while rendering existing leases almost worthless by imposing a regulatory freeze on actual drilling, but Biden also keeps talking about weaning Americans from fossil fuels ASAP, praising the U.N. scheme to have financial institutions steer capital away from the oil industry, and ESG ratings are branding oil companies as socially irresponsible.
Who would want to go out on a limb and commit huge sums of capital if they fear that Uncle Sam wants to curtail, if not crush, their business?
If Democratic politicians really wanted to lower gas prices for consumers and squeeze oil company profits, they would use the law of supply and demand to help them. They would remove all restrictions from drilling and selling oil. Oil companies would resume the cutthroat competition that has characterized their industry from the beginning. Supply would go up, prices and profit margins would go down, and American consumers would be thrilled.
Of course, progressives tend to justify their heavy-handedness on economic policies by invoking “justice.” Democrats are the party of “fairness,” right? Well, not exactly. Consider this: Just as oil company profits are at or near record highs today, so U.S. homebuyers are facing record-high house prices. The reason is exactly the same: low supply relative to high demand. To be consistent, then, shouldn’t Congress fine all those homeowners who are taking advantage of current market conditions to “gouge” buyers? Are those howls of protest I hear? I agree with you! It would be unjust for Congress to limit how much you sell your house for. That would infringe upon your property rights. But then, why should Congress intervene to limit how much a company sells its product for? Morally, there’s no difference.
Progressives reject the rule of law and viciously discriminate against Americans who produce oil. This overt assault on property rights reveals the socialistic spirit that animates today’s progressives.
Our country’s rapid economic growth over the past century and a half has been powered by the energy that oil companies have produced for us. They even produced the oil that Biden is releasing from the Strategic Petroleum Reserve to boost his popularity poll numbers. Congress, by contrast, has never produced a gallon of energy, even as they spend billions of dollars that they have taxed from those companies. How about a little gratitude for American oil companies, Congress?
The only positive comment one can make about the Consumer Fuel Price Gouging Prevention Act is that it makes plain just how allergic progressives are to economic common sense.