NYTimes: Right on Gouging

Surprised?

The Grey Lady gets bashed enough around here, one must remember that it really is a great newspaper. Today, they're correct on "price gouging" and appropriately dismissive of anti-gouging legislation.

It goes without saying that gasoline retailers and oil companies will seek to maximize their profit, which usually means charging the highest price markets can bear.

But is that price gouging?

Because the demand for gasoline is what economists call inelastic, which means that people cannot quickly reduce their consumption when prices rise sharply, abrupt supply shortages lead to steep price increases without any immediate decline in sales.

The most common reason for such increases in gasoline prices is a steep increase in the price of crude oil. But crude oil prices are set in global markets, and even the biggest American or European oil companies are modest players compared with state-controlled oil companies in the Persian Gulf, Russia and Latin America.

Even the mighty Organization of the Petroleum Exporting Countries, which defines itself as a competition-limiting cartel, has only a limited grip on world oil prices. OPEC countries watched helplessly as oil prices plunged in the early 1980s and remained mired below $20 a barrel for most years (excluding the time of the Persian Gulf War in 1991) through the mid-1990s.

It seems hard to believe today, but world oil prices briefly drifted below $11 a barrel in 1998. Not surprisingly, few lawmakers in Congress took that opportunity to denounce “unconscionably excessive” price declines.

Kinda warms the heart. Hat-tip: Instapundit

UPDATE: Insty also has a YouTube of CNN bashing the Democrats for junkets. Tonight on FOXNews: "Was President Reagan really a weasel?"

Media and Blogging Posted by jk at May 22, 2007 4:27 PM