Thomas Sowell

If there is anything worse than partisan demagoguery, it is bipartisan demagoguery. Republican leaders have now joined the Democrats in blaming the oil companies for the fact that prices rise when demand expands more than supply.

Prices have been rising under these conditions for thousands of years, long before there were any oil companies. This has happened with everything from food to furs and it has happened among people in every part of the world.

What has also happened in recent times has been that higher gasoline prices bring outraged charges of "gouging" by Big Oil. Some of the most emotionally powerful political words and phrases are wholly undefined -- "exploitation," "greed," "social justice" and the perennial favorite, "gouging."

Are the oil companies charging all that the traffic will bear? No doubt. But they were probably charging all that the traffic would bear when the price of gasoline was half of what it is today.

Even businesses that are losing money are charging all that the traffic will bear. Otherwise they could raise their prices and stop losing money.

Most of the people who are making this claim are charging all that the traffic will bear for their own labor or the use of their own products. Dressing up the plain fact that we all usually prefer more to less in political rhetoric about "gouging" explains nothing. Something that is true all the time cannot explain drastic changes.

Is it rocket science that, when oil prices hit new highs, gasoline prices also hit new highs? Do you think the price of wheat could double without the price of bread going up? Would we have politicians running around spouting off about "gouging" by Big Wheat?

No matter how big American oil companies are, there are other oil companies around the world and the price of oil is determined in international markets. As for investigating Big Oil, that has been done time and again already, with nothing to show for it.

Is it rocket science that, when huge countries like India and China have rapidly growing economies, their demand for oil goes up by leaps and bounds? Is it rocket science that, when demand shoots up but supply doesn't go up as much, prices rise?

Prices are a symptom of an underlying reality. Politicians can seize on the symptom and even pass laws dealing with it, without changing the underlying reality.

Prices are like a thermometer reading. When someone has a fever, it is not going to do any good to put the thermometer in ice water to bring down the reading. If you think the fever is gone, it may not be long before the patient is gone, if you don't do something about what is causing the fever.


Thomas Sowell

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

Creators Syndicate