Fallacy plus propaganda can equal irresistible politics and expensive mistakes. In a tantrum over gasoline prices, the US House has passed a bill that makes “price-gouging” a federal crime. The Senate will consider similar legislation this month. The measure is an exquisite fallacy enshrouded in propaganda. Unless lawmakers come to their senses, it will pass.
The bill, HR 1252, makes a crime out of behavior it can’t define. During an emergency declared by the US president, it would be illegal for anyone to sell oil products at a price that was “unconscionably excessive” and that indicated the seller was “taking unfair advantage of the circumstances related to an energy emergency to increase prices unreasonably.” The bill offers parameters by which to assess these ambiguities, among them whether a price “grossly exceeds” either the average price during the 30 days before the emergency or the prices of products available from other sellers in the same area. Sellers must await prosecution to learn the meaning of “grossly exceeds.”
Riot of adverbs
From nowhere amid this riot of scornful adverbs does there emerge a useful definition of the activity that Congress would make a criminal offense. Indeed, no such definition is possible because the activity never occurs in any general way. Competition doesn’t allow it. Sellers who aggressively raise prices during emergency shortages lose business to competitors who do not. Markets are self-enforcing. Continuous monitoring by federal authorities ensures that fuel markets work. This is partly why all formal investigations of past price increases have uncovered no “gouging” by refiners or major marketers.
HR 1252 thus makes a federal crime out of behavior that its sponsors can’t define, that economic theory rejects, and that history says doesn’t exist. It’s a meaningless stack of empty phrases-“price-gouging,” “unconscionably excessive,” “unfair advantage,” “grossly exceeds.” It’s propaganda devoid of substance that threatens victims of unlucky interpretation with stiff civil and criminal fines, even jail terms. Lawmaking can’t get much worse than this.
Yet who will oppose a measure that professes to capture and punish “price-gougers?” Americans spoiled by decades of low fuel prices have ridden their excesses into an uncomfortable market turn. Many of them are angry and want the government to make prices low again. Lawmakers are accommodating them by inventing a class of villains. They’ll be hard to dissuade from their mistake.
And what a mistake it will prove to be the next time hurricanes wallop refineries or something chokes crude oil supplies. Prices jump at times like those. So what is an oil seller who doesn’t want to go to prison supposed to do? Allowing prices to rise with the market risks having the increase deemed “grossly excessive.” The safe alternative is to sell below the market, drain inventories, shun replacement supplies, and suspend sales until the emergency subsides.
HR 1252 thus would discourage product sales in a supply emergency, just what consumers don’t need. The gullible would see compensation in the absence of “price-gouging.” But there’s no price-gouging now. Why impose a costly and unnecessary tradeoff?
Self-destructive nonsense like HR 1252 comes about because of an unseemly need of politicians to assign blame. When gasoline prices arouse public ire, politicians blame oil companies. They do so despite the investigations that regularly find oil companies innocent of price manipulation. And they incite suspicions about “price-gouging” when no such thing exists in a free market.
Dodging blame
This all is a dodge. Blame for the elevation of fuel prices belongs to Congress and federal agencies. Fuel specifications are stricter and more prescriptive than they need to be and add unnecessary costs to the manufacture of gasoline, diesel, and other oil products. US laws and regulations, on matters ranging from federal oil and gas leasing to permitting of refineries and pipelines, have for decades militated against the expansion of supply. With consumption unrestrained, a price-raising crunch was inevitable.
Instead of accepting blame and correcting errors, though, lawmakers seem determined to spin law out of fallacy and claim, incredibly, to be helping consumers. They might just as well outlaw hurricanes.