Rather than answer myself, I call upon the honorable Thomas Sowell:
Some people think that the reason the public misunderstands so many issues is that these issues are too “complex” for most voters. But is that really so?
With all the commotion in the media and in politics about the high price of gasoline, is there really some terribly complex explanation?
It is clear that many people prefer to blame President Bush. Others prefer to blame the oil companies, who have long been the favorite villains of the left.
Politicians understand that. Numerous times they have summoned the heads of oil companies before Congressional committees to be denounced on nationwide television for “greed,” with the politicians calling for a federal investigation to “get to the bottom of this!”
Now that is emotionally satisfying, which is the whole point. By the time yet another federal investigation is completed— and turns up nothing to substantiate the villainy that is supposed to be the reason for high gasoline prices— most people’s attention will have turned to something else.
Newspapers that carried the original inflammatory charges with banner headlines on page 1 will carry the story of the completed investigation that turned up nothing as a small item deep inside the paper.
This has happened at least a dozen times over the past few decades and it will probably happen again.
What about those “obscene” oil company profits we hear so much about?
An economist might ask, “Obscene compared to what?” Compared to the investments made? Compared to the new investments required to find, extract and process additional oil supplies?
Asking questions like these are among the many reasons why economists have never been very popular. They frustrate people’s desires for emotionally satisfying explanations.
Is there anything complex about the fact that with two countries— India and China— having rapid economic growth, and with combined populations 8 times that of the United States, they are creating an increased demand for the world’s oil supply?
The problem is not that supply and demand is such a complex explanation. The problem is that supply and demand is not an emotionally satisfying explanation. For that, you need melodrama, heroes and villains.
I haven’t seen any filling stations hurting for customers at $3.75. I haven’t seen them closing down because nobody will pay them.
It appears that for a lot of years, the oil companies were vastly under-pricing the value of what consumers were willing to pay.
And if people are willing to pay $3.75 a barrel for gas, and companies are willing to pay 126 a barrel for the raw oil, that must be what the price should be.
This guy is not blaming the Bush administration or the oil companies, but speculators that are taking advantage of loop holes in the regulation of derivatives.
If you are a free market supporter then you should support the concept of a free flow of information. The author's contention is that information is not being allowed to flow freely and this is allowing speculators in-the-know to profit at the expense of those in-the-dark. And not because the speculators build a better mousetrap or because they provide better service, but merely because they are the ones running the Ponzi scheme.