The year of the demagogue

Paul Greenberg

5/31/2006 12:01:00 AM - Paul Greenberg

This has got to be the Year of the Demagogue if even calm, low-key Mark Pryor has started to sound like one. The junior senator from Arkansas was once so generally blah that folks tended to forget just who the junior senator from Arkansas was. But now he's demagoguing the high price of gas with the best of 'em, or rather the worst.

Sen. Pryor blames $3-a-gallon gas on an insidious price-gouging conspiracy on the part of "several retailers, refineries and wholesalers . . . . " No need to name names. Every conspiracy must seem shadowy.

Sen. Pryor had demanded that the Federal Trade Commission investigate his accusation in the wake of high gas prices after those evil twins, Katrina and Rita, tore through the Gulf Coast with its oil wells and refineries. They'd obviously been put up to it by Big Oil. But after a nine-month investigation, the FTC announced that it had found no evidence of an industry-wide conspiracy to gouge the American consumer.

On the contrary, according to Louis Silvia of the FTC's bureau of economics, gas prices would have gone even higher in the aftermath of the hurricanes if the oil companies hadn't increased imports and upped production at refineries out of the hurricanes' path.

"When you see them responding to prices going up by producing more," Mr. Silvia said of the oil companies, "that's a hallmark of competitive behavior," not a conspiracy to boost prices. But when the facts don't fit the theory, as any demagogue knows, forget the facts.

Rather than argue with the FTC's findings, Sen. Pryor wanted to change them. When the head of the FTC - Deborah Platt Majoras - wouldn't play along, she was subjected to a royal grilling before the Senate Commerce Committee. She responded, in general, with the indulgence of someone who knows her stuff - and her highly professional staff.

Mark Pryor wasn't interested in any explanation; he wanted a scapegoat. So did any number of his fellow senators, to judge by their unremitting pressure on Chairman Majoras to bring them Big Oil's head on a platter.

What would Mark Pryor have the country do? He wants Congress to start enacting price controls for gasoline, though he prefers euphemisms like anti-price gouging legislation. Which is understandable. Price controls have acquired a bad name. No wonder. The last time the country tried them, during the Carter administration, they resulted in severe shortages and long lines at the pump. The practical effect of Jimmy Carter's response to the Energy Crisis was to aggravate and extend it.

But that was a long time ago, and people forget, especially when they're being stung by today's high gas prices and looking for somebody they can blame. Which is why Sen. Pryor's proposal will appeal to anybody who's too furious about gas prices to think straight. Unfortunately, fury is not the best mood in which to make rational policy.

The debacle that was the Carter administration's energy policy could have been foreseen. To review Economics 101: The function of higher prices is not just to reflect higher costs, but to dampen demand in order to maintain supply. In her testimony before the committee, Chairman Majoras pointed out that the sharp rise in gas prices after Katrina resulted in more gas getting to the market.

It's called the law of supply and demand, and we interfere with its operations at our risk. To cite Henry Hazlitt's little primer, "Economics in One Lesson," the first effect of price controls is to increase demand, since people can now afford to buy more of the commodity, and the second is to reduce supply, since the producer can't afford to sell it at a loss, or in this case will seek a better price for his oil in what is now a global marketplace.

Remarkably predictable, the workings of the free market. Class adjourned.

But the demagoguery goes on. According to a press release from his office, Sen. Pryor is going to defend us from "the greed and profiteering in the oil marketplace."

Despite his disappointment that the FTC's official report didn't support his conspiracy theory, the senator plans "to address these issues as we move forward." Or maybe backward to the 1970s.