I've had a lot to say about Dick Jr.'s campaign ads for governor -- and none of it good. But I haven't wanted to leave the impression that Guv Jen has covered herself in glory by a lack of commentary about her campaign, so I was working on an article about her economic illiteracy. Alas, this morning Dick Jr. had a radio commercial that trumped any of the economic nonsense that Jenny has spouted. So he's not giving me a chance to appear even-handed in this campaign -- even though I'm trying.
To wit, Dick Jr. pronounced that evil Big Oil is raping the consumers with record high gasoline prices while raking in record profits. The problem with Dick's charge against the oil companies is that it's a load of cobblers, as any experienced businessman -- as he claims to be -- would know. (Besides, who is Dick Jr. to complain about high prices for ordinary products in light of the extortionate amounts his Quixtar "Independent Business Owners" browbeat their relatives and friends into paying for soap and vitamins?)
Gasoline is expensive, because China and India have greatly increased the demand for the petroleum from which it is refined. In time new oilfields will go into production, and supply will exceed demand and prices will drop. Meanwhile supply is artificially restricted because U.S. lawmakers banned drilling for oil across large swaths of the country, including the Alaskan Arctic, the West Coast, the eastern half of the Gulf Coast, and the Atlantic Coast. Another problem is that environmental regulations and petty NIMBY politics have prevented the construction of any new gasoline refineries in the U.S. since the late '70s. That's another bottleneck that restricts the supply of gasoline.
On top of all this, the federal government has mandated a myriad of different gasoline formulas for different parts of the country. Therefore, if oil companies don't estimate the need for different formulas correctly, one part of the country can experience a gasoline shortage of one formula while another part has plenty of another formula, which is illegal to sell anywhere else. (Fortunately, the Bush Administration has recently suspended, but not abolished, this idiocy to alleviate shortages ahead of the summer travel season.)
Despite these problems restricting supply, gasoline is still a lot cheaper by volume than that bottled water you buy while filling up at the corner gas station. That's because the competition in gasoline is intense. There is no conspiracy to jack up prices above the level that the laws of supply and demand dictate. (Indeed, it would be a criminal violation of federal law to do so, and repeated investigations have found no shred of evidence of such collusion.) And that is why oil company profits net out at about 10% percent, which an experienced businessman like Dick Jr. should know is pretty typical for most large companies.
So what should we conclude from Dick Jr.'s latest ad? Either he isn't the experienced businessman he claims to be, which is why he is spewing such tripe about oil company profits, or he is a political whore who will tell you anything to get your vote. You decide.