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My friend Andy Morriss (who blogs with me over at Market Correction [2]) has this important letter [3] in today’s Wall Street Journal:
Your editorial on the
congressional obsession with claims that gasoline prices are high
because of a conspiracy among oil companies rightly pointed out the
lack of a factual basis for the endless investigations ("The Gas-Gouging Myth [4],"
May 24). You are too gentle with Congress, however. An important part
of the gas price story is the responsibility Congress bears for a
century of failed federal energy policies. Not only did price controls
in the 1970s give us gas lines but the Mandatory Oil Import Program in
the 1960s produced such absurdities as the "Mexican Merry-Go-Round," in
which oil was shipped by tanker from Mexican oil fields to Brownsville,
Texas; unloaded in customs bond into trucks; driven across the border
back into Mexico, around a traffic circle, and back into the United
States, and reloaded on tankers for shipment to the East Coast,
qualifying the oil for a quota exemption as an overland import.
The impact of thousands
of equally sensible rules on the U.S. refining industry has left it
with insufficient capacity, insufficient pipeline connections, and huge
barriers to entry caused by regulatory requirements. When EPA and state
"boutique" fuel requirements are piled on top of such a fragile
structure, it is no surprise that the result is high prices and a lack
of capacity to respond to supply disruptions like last year’s
hurricanes. Rather than congressional hearings on the oil industry, it
is time for some hearings on Congress’s repeated assaults on energy
markets.
Andrew P. Morriss
Professor of Business Law and Regulation
Case School of Law
Cleveland
Market prices reflect reality, the good, the bad, and the indifferent.