OPINION: Market forces don't justify the current high price of gasoline
As I write this, the price of a gallon of gasoline in Northern Wisconsin is $3.50 or more. I drive 55,000 miles a year, more than anyone else I know. The impact of these prices upon me is enormous. I fill my 18 gallon tank at least three times ea...
As I write this, the price of a gallon of gasoline in Northern Wisconsin is $3.50 or more. I drive 55,000 miles a year, more than anyone else I know. The impact of these prices upon me is enormous. I fill my 18 gallon tank at least three times each week.
At these prices, that averages nearly $650 per month. As a certain former President would say, I feel your pain.
I happen to be one of those people who believe that these outrageous prices are not the natural result of market forces. With oil companies making the highest profits of any companies in history, inventories comfortably high and crude oil prices relatively flat, market forces simply do not explain a spike of this magnitude.
As I see it, these prices most likely result from a criminal conspiracy at the highest levels of the major oil companies to fix prices and manipulate markets.
Many people will react to this idea as if it were some sort of paranoid conspiracy theory. The image of Armani-clad corporate executives skulking off to a hotel room somewhere to divide up the world's markets and fix prices for a commodity seems farfetched. However, at least one case of exactly such behavior has been proven in court, albeit not for gasoline. The commodity in that case was lysine, an amino acid derived from corn that is broadly used in commercial food production. Using an informant, the FBI managed to convict several companies and their executives, including the American company Archer Daniels Midland. Over $100 million in fines were collected and a number of people went to prison.
A public radio program called This American Life detailed the unusual story in 2004. www.thislife.org/Radio_Episode.aspx?sched=1015 . You can read the Wikipedia entry at en.wikipedia.org/wiki/Lysine_price-fixing_conspiracy, which also contains links to two books written about this extraordinary criminal prosecution.
I mention the lysine conspiracy for two reasons. First, to demonstrate that such illegal behavior exists. Second, to show exactly how hard it is to prove.
In order to prove the kind of price-fixing that took place in the lysine case, and that many people suspect takes place with gasoline, the authorities pretty much have to catch the culprits in the act. In other words, you need to have an informant right in the hotel room, wearing a listening device, in order to prove the case. You also need to have the meeting take place in a location that is subject to our laws.
That is a pretty tall order. For example, the Organization of Petroleum Exporting Countries is a cartel. They operate openly and fix prices and markets on a regular basis. Their meetings are reported in the news. Under our laws, they would be a criminal conspiracy, but we can't touch them. They operate outside our jurisdiction and they are countries, and thus hide behind sovereign immunity.
I don't know what would happen if they held one of their periodic meetings in New York, but it would be interesting to find out.
Major oil companies like Shell, BP and Exxon Mobil don't hold such sessions openly. Whatever mechanism they use to give us record high prices and make record high profits is secret.
New laws would not help. Price-fixing and market manipulation are already serious crimes under both state and federal laws. The problem is discovery and enforcement. Until some disgruntled oil company employee visits the FBI and turns informant, all the laws in the world will not stop this behavior or put the perpetrators in prison.
Besides, we know that these folks are capable of simply holding us hostage. I well remember the long lines in 1973, when a shortage of gasoline was deliberately created that changed our thinking about gas prices from 30 cents per gallon to a permanent floor of $1.30 overnight. Even that amount seems nostalgic these days.
What we need to do is use our power as consumers to bring these racketeers to their knees. One-day symbolic boycotts will not do. Our only long term hope is to become more efficient at using the resource, reducing the market pressure that is used to keep us subjugated.
Our 25-mpg cars should become 50 mpg cars, with no loss of comfort, safety or performance. That is well within our reach technologically. It is much more closely related to current technology than going to the moon was in 1962. Until we as consumers demand this, it will never happen.
When it does happen, the results will be far reaching. It will not only get the major oil companies off our backs, but address much of the global warming problem, repair our balance of payments and generally restore our economic pre-eminence in the world.
That would be a bargain.
Gary Sherman represents the 74th Assembly District in the Wisconsin Legislature