Who Are the Gougers?

The irony is that people here are gouged at the gas pump every day by taxes of more than 40 cents per gallon, only about half of which go to providing services for motorists who pay the fees. What about the other half? Gravy, to put it plainly. Some goes directly to governmental agencies in terms of budgets that include distinctly above-market salaries and benefits. Some of it is handed to transit agencies for such purposes as sinking Hollywood Boulevard, and some of it is handed to transit riders whose fares are grossly subsidized by the motorists they’re feeling superior to.

Another irony is that even though one fuel-pump fee that motorists pay is taken on a percentage basis--7.25% for state sales tax--you don’t hear legislators complaining about the windfall they’re going to receive as a byproduct of the price hikes or pledging to rebate that windfall to consumers. They’re also not discussing the windfall value of the cleaner air we’ll all breathe this summer as people drive less in response to higher gas prices.

If you’re tempted to buy the conspiracy theories about oil-company price fixing, search your memory. Think back to Arco’s capture of market share when it shifted its pricing structure, introduced an ATM card payment system and cleaner-burning fuels ahead of other companies. Think about the way you shop around and wait in lines for the lowest prices, ensuring competition between companies every time you buy gas.

And if such memories don’t convince you, how about some common sense and logic. If the oil companies were price-fixing, then they would be cheaters in our capitalist system. We all know there’s no honor among thieves, right? Just think what a killing would be made by any oil company that decided to drop its prices in the midst of all this. People would flock to its stations, its stock would rise and it would get great publicity. What could the other oil companies do, jail the cheaters? The companies would have to lower prices even more than the cheaters to regain market share and satisfy their stockholders.

Price fluctuations are evidence that the system works, because the world is not a static place. Usually we don’t mind this because we save money in low-price times and endure high-price times. But in this case, the government--which does throw cheaters in jail--has prevented us from enjoying the lows because of high fuel-pump taxes, while doing nothing to help us withstand the highs. If motorists had been pocketing that extra 20 cents per gallon for the last four years, they certainly could have withstood a short-term price hike with much less difficulty, waiting for the market to do what it has always done: bring the prices down to the lowest level possible, given the laws of supply and demand.

Think about this: If your car got 20 miles to the gallon and you drove the typical 12,000 miles per year, you’d have banked about $480 over the last four years--not including interest. That would have gone a long way toward making this latest gasoline price hike less painful.

If the legislative and regulatory community is suddenly so concerned for consumers, perhaps it ought to stop posturing over a proposed 4.3 cents a gallon federal tax reduction and go all the way, knocking off at least the 20 cents-plus a gallon it currently diverts to nonhighway uses. That way, gas prices would drop immediately, saving money for consumers in the near term, and then drop back down under a dollar per gallon as the market stabilizes in the fall. Sounds like a good deal to me.