Demagogues Have Field Day Over Gas Prices Politicians Could Use Lesson On Law Of Supply And Demand

You know you’re getting on up in years if you can remember when you could fill up your car’s gas tank for a little more than $3.

There even was a time a few decades ago when gasoline service stations waged price wars that often brought the per-gallon cost down into the teens.

Those were the days before inflation drove up the prices of practically everything. The public just accepted most of the upward changes as inevitable, because their incomes were rising sharply, too.

Who complains now about automobiles that sell for 15 or 20 times their cost in the early 1950s, $14,000 houses that go for perhaps $170,000 or bags of groceries that have risen in price by multiples of 15 or 20 over the years?

But let the oil companies raise what they charge for a gallon of gas and a storm of protest erupts. A dollar-forty or a dollar-fifty a gallon? What an outrage!

Today’s prevailing gas prices are about six or seven times those of the early 1950s. Fill-ups are a bargain compared with the percentage increases in costs of nearly every product or service you can think of.

Is that perceived in Washington, where the spendthrift politicians sense an opportunity for demagoguery in what’s happening in the oil business?

The president calls for action and releases what is about a half-day’s supply from the government’s petroleum reserves. His Republican opponent cries out for repealing the most recent hike in the federal tax on gasoline. Investigations are under way.

Once again, the fundamental economic law of supply and demand is challenged by political grandstanders searching for votes.

Ironically, this same bunch just finished adopting a federal budget that includes taxpayer-funded price supports for all kinds of agricultural interests. Not only do taxpayers get stuck with the bill, they have to pay more for products caused by those government subsidies, too.

The latest gas price hubbub is a sober reminder that all the noble pledges made during previous energy shortages - such as those in the 1970s - are forgotten when the crises are over.

When the pumps are wide open again, gas-guzzling cars proliferate and drivers zoom over the interstates like they were competing in the Indy 500.

Gasoline conservation? Forget it. But now that the cheap gas party is threatened, someone has to be blamed. How about those greedy oil companies? There must be a conspiracy of some sort.

If there is, which is highly unlikely, let it be exposed. Meanwhile, consider the realities in the oil business that are more likely culprits. Wall Street analyst Raymond DeVoe of the firm of Legg Mason Wood Walker cites a few:

America’s current supply of crude oil is the lowest in 20 years.

No new refinery has been built in the continental United States since 1980.

World crude oil consumption is outpacing production. The difference has to come from existing inventory.

Many refineries around the United States are operating at full capacity.

Demand for oil from developing counties - the so-called Third World - is growing rapidly and likely to continue rising.

The long period of abundant oil supplies created a false sense of security and led to overconfidence that an oil glut would be around awhile.

Then there’s the Iraqi situation. Iraqi oil has been held off most world markets since the Kuwaiti invasion. Optimism that Iraq would agree to conditions for reopening its oil exports, which would add to world supply, has faded.

For the last 15 years, DeVoe said, “the energy sector in world markets has operated under a kind of benign neglect.” Ample supplies of oil made us all complacent. Suddenly this spring, we are jolted out of our reverie.

If we really are serious about coping with rising gasoline prices, we should stop buying gas-guzzling autos, stop driving so fast, limit use of our cars and realize that the United States has some of the cheapest fuel costs in the world.

Take a trip abroad to Great Britain, Japan, France, Germany and Italy and you’ll see per-gallon prices of $3.50, $4 or higher.

Can President Clinton and Sen. Bob Dole, who both are trying to score political points in the present environment of rising gas prices, be unaware of that? Or do they think the American public is too dumb to see through their smoke and haze?