Column on Hunting for Oil Conspiracies

On Oil Conspiracy Theories

Tibor R. Machan

For quite a while now California politicians and bureaucrats have been
searching for a conspiracy of oil companies which is supposed to explain
raising gasoline prices. 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 get back to when Congress
spent just a few weeks in the nation?s capitol!)

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

Because of the efforts of environmental lobbyists, there hasn?t been a
new refinery in the USA since 1972. Nor have there been new wells dug,
even though there are many regions within the country that have 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. (The
media tends to be alarmists following the belief that only bad news can
attract viewers and readers. Is that belief true?)

Then there is the increase in demand. The Chinese are improving their
standard of living from the recent state sanctioned semi-capitalism that?s
enabling millions of them become entrepreneurs and providing them 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
corresponding rise in 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. Given those
other factors of supply and demand, oil has become a potent weapon to use
against the West.

Now all this doesn?t require much expertise, only a little bit of
attention to national and international news reports, maybe 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. They aren?t all that high,
actually. Economists have pointed out, though the mainstream media has
failed to report it, that compared to the percentage of one?s income spent
on gasoline in the later 70s and early 80s, today?s percentage is roughly
the same. Sure, the absolute numbers are high. But that is not what
counts.

If people?s income has grown by significant percentages, whether what
they spend on food, housing, transportation, recreation, health care and
so forth has increased a lot must all be considered in light of the big
picture. At least if one wants to get it right about whether gasoline and
other prices have undergone unusual, abnormal increases that suggest some
kind of industry conspiracy. It turns out, they have not.

And if you look around, this is also evident, without any costly and
time-wasting Congressional inquiry: people speak louder with their
purchases than with their voices. So they 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 common sense
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.