Thomas Sowell

The Supreme Court's recent 8 to 0 decision (Justice Alito not yet participating) shot down a claim that oil companies were colluding in setting prices. That claim was upheld by the far-left 9th Circuit Court of Appeals but neither liberals nor conservatives on the Supreme Court were buying it.

This unanimous vote should also tell us something about those politicians who are forever blaming rising gasoline prices on oil company collusion and "greed." There is no point exposing a lie unless we learn to be skeptical the next time the liars come out with the same story.

After hurricane Katrina destroyed a lot of oil processing capacity around the Gulf of Mexico, there was -- surprise! -- less oil being processed. With less oil being supplied -- surprise again! -- gasoline prices rose.

However much economists rely on supply and demand to explain price movements, politicians need villains, so that the pols can play hero. Big Oil is a favorite villain and has been for decades.

There is nothing like the political melodrama of summoning oil company executives to televised hearings before some Congressional committee, where politicians can wax indignant at Big Oil's profits.

It so happens that Big Government takes more money in taxes out of a gallon of gas than Big Oil takes out in profits. But apparently somehow taxes don't raise prices. They certainly don't raise indignation from the politicians who voted for those taxes.

After the oil processing facilities were repaired and put back in operation -- yet another surprise! -- prices came back down. Supply and demand has been doing this for centuries but apparently the word has not yet reached some politicians.

There is another aspect to supply and demand. As countries like China and India have in recent years begun allowing more market transactions to replace government controls, their economies have begun growing much more rapidly.

Growing economies mean rising demand for food, for shelter, for more of the amenities of life. That in turn means a rising demand for oil, leading to rising oil prices around the world.

Those who think in terms of supply and demand suggest -- do surprises never end? -- we ought to supply more oil to meet the rising demand. But the very politicians who are noisiest about the high price of oil are the most bitterly opposed to increasing the supply.

Drilling for more oil might disturb some animals or birds or fish. Worse yet, on a clear day people with beachfront homes might be able to see an offshore oil rig out on the horizon.

Even those who can't see oil being drilled in some isolated hinterland in Alaska would know that the drilling was going on, and that would upset their sensitive natures.


Thomas Sowell

Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.

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