Economists tell us that the laws of supply and demand dictate rational results. Yet somehow, gasoline prices are skyrocketing at a time when the current supply is adequate. And diesel, which used to be cheaper than gasoline, costs up to a dollar per gallon more than gas.
I don't have all the answers for the questions raised by this Great Oil Crisis of 2008, let me be frank. But where our elected representatives and the media appear flummoxed by current events, unable to explain high prices and powerless to do anything about them, I have noted a few simple facts and trend lines that reason to affect the situation. They seem to have eluded widespread notice, notwithstanding all the hand-wringing, so I review them here:
Oil companies wear the pants. Who's got the power? Those who supply the power. Why do we keep forgetting this, generation after generation? Big Oil does what it wants, when it wants. Its power can bring governments to their knees. The heftier its reserves, the better a country can stand up to the corporate leviathans. But, be they political or geological, impediments to harmonious oil company existence and undisturbed megaprofit are dealt with in time, and always to the petro-giants' satisfaction. (Look out, Hugo Chávez, they're coming for you.) What do they care about? One thing: money. Which brings us to . . .
George W. Bush. Friend, if you were hoping that the U.S. government might turn a blind eye to profit and plunder in the oil game, this is your special time. An oil man and the son of oil men, the forty-third president is probably the last guy who'd stand in the way of other oil men exercising their God-given right to squeeze cash out of consumers. But as second-term lame ducks who have gutted most federal regulatory agencies, Mr. Bush's outfit couldn't put the brakes on a runaway cheeseburger, much less the oil industry's extreme pricing policies - and that's assuming it wanted to, which it doesn't. Far from signaling a cooldown lap, the Bush team celebrates its final year in office by inviting the oil boys to put the hammer down and ride the wall one last time following seven go-go years on the free-market superspeedway. If that means consumers take it up the injector pump, so be it.
Method to madness. High diesel prices bear virtually no relation to the cost of manufacture or new low-sulfur requirements. But that doesn't mean they don't make sense. Car owners can cut back on driving to save fuel, but truckers have got to keep on trucking. And because businesses pass on the extra fuel cost, it allows each of us to help feed the oil industry's appetite for cash. As a side benefit, sharply higher prices today make more substantial gasoline taxes tomorrow - to fund mass transit and infrastructural improvement - even more politically unpalatable. ...next page >>