The Big Idea

I Smell Gas

A subject that makes congressmen stupid.

Few topics seem to addle the collective brain of Washington like high gas prices. Politicians who raise this issue can generally be assumed to be partisan, cynical, demagogic, and dishonest. But one must not discount the possibility that something about the subject actually makes them stupid.

With gasoline prices now spiking around $3 a gallon—near their inflation-adjusted 1981 peak—we are witnessing stupidity on wheels. Republicans, who as incumbents fear that they will be blamed, are in a kind of frenzy to abandon free-market principles, basic economic reasoning, and increasingly, reason itself. Their week began with Senate Majority Leader Bill Frist and House Speaker Dennis Hastert calling upon the Bush administration to investigate possible price-gouging and market manipulation. The Republican leaders went so far as to recommend “sweeps” of gas stations to confirm that price increases reflect “changes in market conditions” and are not merely attempts by businesses to earn money. The next day, President Bush joined in calling on the Bush administration to launch an investigation. As it happens, a Federal Trade Commission investigation into possible market manipulation is already under way from last year, when Bush and Congress asked for one following a post-Hurricane Katrina gas-price rise. While he was at it, Bush also asked Congress to repeal the tax breaks they joined together to give to the oil companies last year.

Republican talk about price-gouging is inane at several levels. If you don’t have some sort of monopoly power, gouging is another word for charging the highest price the market will bear, also known as capitalism. This is why the FTC investigation has turned up nothing. What constrains filling stations from marking up gas excessively is not the fear of prosecution but competition from other filling stations. Even many Republican congressmen understand this, but calling for an investigation is a good way to deflect attention from the party’s favoritism toward corporations that are now so profitable that they have become unpopular. Of course, there is outrageous anti-competitive conduct in the petroleum industry—it’s called OPEC. But no presidential administration, especially the current one, takes seriously the idea that this price-fixing cartel is a criminal conspiracy under American law. Republicans would sooner propose a windfall-profits tax—an anti-market notion if ever there was one—as Sen. Arlen Specter recently did.

Democrats, who can barely restrain their glee at this political opportunity, bandy the same implausible complaints about gouging and “speculation” and speak even more enthusiastically about confiscating oil-company profits. They also have their own distinctive form of gas-price stupidity, which is to ignore the conflict between the environmentalism they espouse and the cheap fuel they demand. House Minority Leader Nancy Pelosi even moaned about high gas prices in her Earth Day statement last week. If you care, as Pelosi claims to, about clean air and preserving the coastline, you should welcome high gas prices. Even Al Gore, who once called cars “a mortal threat to the security of every nation,” decried high gas prices when he ran for president in 2000. Democrats like to argue that gas prices are high because Bush has done too little to develop alternative energy sources and reduce dependence on imported oil. But it is high oil prices, far more than ethanol subsidies or incentives to buy hybrids cars, that will drive the development of new fuels.

And then there are the gas-related idiocies that afflict both sides. Bob Menendez, a Democratic senator from New Jersey, has already raised the perennial Republican notion of “suspending” the 18-cent-per-gallon federal gas tax, an idea that is bad for too many reasons to enumerate in a single day. A number of Republicans are now repeating the Democratic shibboleth that overpaid oil-company executives, rather than supply and demand, are somehow to blame. Whichever party is out of office tries to assert that the party in office has the power to reduce gas prices but simply chooses not to do so. Everything Democrats are now saying about Bush echoes what Republicans said about Bill Clinton when gas prices spiked in 2000. When you’re out of power, you attack the president for not using the Strategic Petroleum Reserve, or, if he gives in to your demands, you denounce him for misusing it. “The strategic reserve is meant for times of war or a major disruption in oil supplies,” Bush told an audience in October 2000, when he was criticizing Al Gore for (hypocritically) proposing to do the same thing Bush has just ordered done. If you are a Democrat, you get the option of either attacking the president for not leaning on his Saudi buddies to turn on the oil spigot, or accusing him of manipulating the Saudi oil supply for political gain in advance of an election.

What none can acknowledge is that higher gas prices in the United States are a good thing. To be sure, oil at $70 a barrel causes hardships for working people and delights some of the world’s worst dictators. But cheap gasoline imposes its own costs on society: greenhouse gas emissions, air pollution and its attendant health risks, traffic congestion, and accidents. The ideal way to cope with these externalities would be with higher gas taxes or a carbon tax. But these are politically impossible ideas at the moment—Democrats lost control of Congress in part because they passed a 4-cent-per-gallon tax increase in 1993. The next best solution is the one that has arrived on its own: a high market price for oil, which spurs conservation and substitution. Sustained high prices will bring about behavioral and political changes: energy conservation, public transportation, less exurban sprawl, and eventually the economic viability of alternative fuel sources such as biomass, fuel cells, wind, and solar power, which may one day undermine the power of the oil oligarchs. Are politicians too stupid to understand this, or just smart enough not to say it aloud?