THE LIBERTARIAN ENTERPRISE
Number 8, May 1996

A Drop in the Bucket

By Vin Suprynowicz

Special to The Libertarian Enterprise


         Retail gasoline prices are up -- in some cases 25 cents since mid-winter.
         With national elections only six months away, this has naturally brought the politicians running to "ease our pain."
         As cynical as such posturing may be, it does at least accurately demonstrate a difference in approaches between the two branches of the incumbent party.
         Sen. Bob Dole, R-Kansas, has called for the repeal of President Clinton's 1993 increase -- 4.3 cents per gallon -- in the federal gasoline tax. At least that identifies the right villain.
         President Clinton, on the other hand, opts not to reduce intervention by the central government, but instead argues he can solve the problem with yet another one -- selling off some 12 million barrels of oil this summer from the nation's 585-million-barrel emergency petroleum reserve.
         (The president thus makes a virtue of necessity -- Congress ordered him last week to sell $227 million worth of the petroleum stocks to pay for Democratic plans to further meddle from Washington in the operation of local schools.)
         "I have a feeling it (the price rise) has a lot more to do with profits than it does with taxes," intoned Senate Minority Leader Tom Daschle on April 29, invoking the standard bogeyman of America's longest-running left-wing soap-opera: the Robber Baron.
         But statistics show drivers in California now pay 49 cents per gallon in combined federal, state and local taxes. Plenty of other states top that, including New York and Nevada.
         The Silver State has more than doubled its state levy, from 10.5 cents per gallon to 23 cents per gallon, just since 1981. Add authority for the individual counties to charge an extra 10 cents, along with the current federal gasoline tax of 18.3 cents, and we're up to 51 cents of a Nevada driver's $1.43 going straight to the politicians. Does anyone really believe the gasoline moguls make a 51 cent profit on a gallon of gas? A 5-cent profit? Of course not.
         In a competitive marketplace, should any refiner or retailer artificially escalate prices to reap a profit of more than a penny or two, competitors always step in to undercut that price.
         When prices escalate across the board, it's usually wiser to look for reasons that affect all suppliers equally -- like the fact that all California refiners are now under state orders to make a cleaner-burning gasoline available by June 1, even though everyone knew that alone would drive up the price by 5 to 8 cents.
         California refineries supply many other Western states.
         Legislatures like Nevada's have done their best to further stymie honest competition. In the Silver State, it's illegal for any one refiner to own more than 15 gas stations. Then, the federal government recently put many of the more marginal competing stations out of business with unfunded mandates like the new double-walled storage tank requirement, as well as expensive "environmental cleanup" of soils bearing even the most minute traces of gasoline.
         The other major reasons for the current price spike appear to be the conversion of more raw petroleum into home heating oil during the unusually severe winter just past, combined with news of Mr. Clinton's own making: Refiners have been reluctant to maintain large stockpiles at current high prices in anticipation of the United Nations "allowing" Iraqi oil to come onto the world market.
         In fact, 12 million barrels over the course of the summer is laughable. Just for purposes of comparison, Iraq in 1990 held an estimated 100 billion barrels in reserve. Americans alone consume 16 to 18 million barrels per day.
         And at what price will this pitiful drop in the bucket be sold? Which campaign contributor will pick up that "windfall"?
         As Lew Rockwell of the Ludwig von Mises Institute points out, "This administration complains about foreigners dumping their goods on American markets below cost. However, when it's our own government doing the dumping, it's not a vicious practice, but a responsible economic policy.
         "The market specializes in allocating supplies over time via the price system," Rockwell continues in an April 30 news release from the free-market Alabama think tank. "When supply is low and demand is high, prices rise to induce new drilling and distribution. In light of higher gasoline prices, consumers are already changing some summer travel plans, another market response.
         "The market's price system works so well it doesn't need management at all. We don't have a strategic shoe or chicken reserve, yet, somehow, we walk and eat."
         Not only that, economist Rockwell turns out to possess that worst enemy of the liberal, a moderately long memory. Wasn't it just two years ago, he recalls, that Democrats "agitated for higher gasoline prices as a way of inducing consumers to purchase less, drive less, and 'pollute' less?"
         If the politicians really "feel our pain," why not simply cut all their gasoline taxes in half, reducing the price of a gallon, in these parts, from $1.43 to $1.18, overnight? Does anyone really believe we weren't paying for "enough government" back in 1981?


Vin Suprynowicz is the assistant editorial page editor of the Las Vegas Review-Journal. Readers may contact him via e-mail at vin@lvrj.com. The web site for the Suprynowicz column is at http://www.nguworld.com/vindex/.


Pallas, the new sci-fi adventure novel by L. Neil Smith is out in paperback from Tor. Is there room for a socialist utopia on an individualist asteroid? Now available at good bookstores everywhere!



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