Carrie Lukas

Gas Line

Posted on June 05, 2007 | Author: Carrie Lukas
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The average gas price rose more than ten percent in April, allowing pandering politicians to promise relief. They don't say that consumers will suffer worse consequences if the government begins dictating how much oil companies and refiners can charge. And they ignore that government regulations and taxes already are largely responsible for high fuel prices. Instead they offer fantasy.

Take Rep. Bart Stupak's (D-MI) Federal Price Gouging Prevention Act. This legislation would empower the Federal Trade Commission to crack down on anyone in the energy supply and distribution chain who artificially inflates the price of energy.

Harsh penalties might discourage companies from raising prices, but also would convince many not to do business at all, particularly in times of crisis. This would have been a disaster, for example, during Hurricane Katrina. According to a study by the American Council for Capital Formation, if this legislation had been in effect during that time, it would have imposed $1.9 billion in economic costs.

We've all faced the dilemma of either paying more at the conveniently located gas station or going out of the way to someplace cheaper. Forcing both establishments to charge the same means the better-located store would have trouble keeping up with demand, perhaps running out of gas, while the less convenient store would fold.

If a business artificially inflates prices, people turn to other sellers. Competition, not Congress, is the only effective way to keep prices down.

Carrie Lukas is the vice president for policy and economics at the Independent Women's Forum and a senior fellow with the Goldwater Institute. A longer version of this article was published on National Review.

Key Links:
-National Review: Politicians Pick their Prices
-Hoover Institution: Price Controls on Gasoline? Bad Idea
-The Concise Encyclopedia of Economics: Price Controls

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