In the popular mind Big Oil is gouging consumers and should either have their profits capped or taxed away. In the bureaucratic mind (for the sake of argument, assume there is one) taxes on refined oil should not be decreased when gasoline prices spike, maybe they should even be raised to discourage consumption and further increase revenue. These opinions have been expressed repeatedly by that Huey Long of the airwaves, Bill O’Reilly; and by politicians like Hillary Clinton and Jennifer Granholm.
Alan Reynolds had this to say on the topic in The War on Energy:
Demand is apparently unaffected by [energy] prices, but is directly affected by taxes. Besides, with higher prices we would only get more energy, while with higher taxes we could get more government. This is a plan to solve the chronic shortage of government.
Thanks to Reason magazine for the that quote from the October, 2007 Reason magazine feature, “Thirty years ago in Reason.”
Things haven’t changed much, including the media and political frenzy to claim “Big Oil’ collusion in setting prices for gasoline.
What we don’t see in media, at least not as prominently, is news like this: Big Oil did not manipulate U.S. gasoline prices: FTC
By Tom Doggett Thu Aug 30, 3:11 PM ET
WASHINGTON (Reuters) – Big oil companies did not conspire to raise U.S. gasoline prices last summer, as it was high crude oil costs and supply problems that caused the spike in pump prices, government investigators said on Thursday.
The Federal Trade Commission said that about 75 percent of the rise in gasoline prices was due to a seasonal increase in summer driving, higher oil costs and more expensive ethanol that was blended into gasoline.
The other 25 percent of the price increase stemmed from lower gasoline production as refiners moved to using ethanol as the main clean-burning fuel additive and lingering damage from hurricanes Katrina and Rita that reduced refining capacity.
“Our targeted examination of major refinery outages revealed no evidence that refiners conspired to restrict supply or otherwise violated antitrust laws,” the FTC said. “We therefore conclude that further investigation of the nationwide 2006 gasoline price spike is not warranted at this time.”
Many lawmakers at the time had accused oil companies, which were raking in billions of dollars in record profits, of overcharging U.S. consumers at the pump.
President George W. Bush directed the FTC and the Justice and Energy Departments to look into whether manipulation or other illegal activity by oil companies was behind the sharp rise in gasoline prices.
The national retail monthly average gasoline price jumped from $2.28 a gallon in February 2006 to $2.89 by the beginning of May, and then declined slightly through June. Prices started rising again in July and hit a peak of $3.02 a gallon during the second week of August, and then took a steep decline to $2.18 by the end of October.
The FTC said its investigation found the increases in motor fuel prices “were caused by a confluence of factors reflecting the normal operation of the market.”
FTC Commissioner Jon Leibowitz dissented from the report’s conclusions and issued a separate statement that said the agency developed a “theoretical model” for why gasoline prices likely increased.
Leibowitz said he believes “there was profiteering (by oil companies) at the expense of consumers.”
I’ll raise a cup of ethanol with a toast: To Jon Leibowitz, simply a fool.