Curmudgeon's Corner

Guilty as Charged?

Posted by Al Campbell on April 22, 2011

U.S., Political, Quality of Life

The morning reading of the Journal Sentinel and the Wall Street Journal brought two stories that are somewhat related.  The Journal Sentinel featured a story from the Associated Press titled “Obama seeks cause of high gas prices” while the Wall Street Journal published an article by Josh Mitchell titled “Linking Mileage to Gas Prices”.

President Obama has announced that his Justice Department is going to “root out any cases of fraud or manipulation in oil markets that might be contributing to $4 a gallon-plus gasoline prices”.

In the other article, the lead sentence is “auto makers are pushing to link federal fuel-economy and emissions targets to the price of gasoline” since consumers won’t pay enough for fuel efficient cars to make them profitable if gas prices aren’t high.

I suspect that a charge of fraud would be too strong, but I do think a charge of manipulating markets could be brought against President Obama and his Administration.  It is also interesting that this market manipulation has hit the auto industry hard since they are required to build vehicles that we don’t want and can’t afford unless, somehow, the price of gasoline can be kept above $5.00 per gallon.  The manufacturers seek relief in the form of reductions in government efficiency rules and mix of model rules when gasoline is not at a sufficiently high price to drive vehicle sales.

Supply and demand seem to be the chief elements in each situation.  If the supply of oil is kept artificially low, then the demand for gasoline will drive the prices higher and higher.  Witness today, and, better yet, witness next year and the year after that.

The auto makers are forced to build vehicles for which no market exists as the result of government manipulation of “standards” that have to be met to ward off penalties being assessed against those same manufacturers.  The Chevy Volt is a prime example.  It has a sticker price of some $41,000 and it has a federal subsidy of $7,000 making the next cost $34,000.  Even with that edge, the sales are extremely poor.  There is simply no real demand for such a vehicle at this point.

But…maybe there can be demand created by manipulating the price of crude by damping its production through bans on drilling in our own oil fields and offshore.  If not an outright ban, then at least our government can ‘slow walk’ any application that might find its way to a regulator’s desk.  Secretary Salazar has seen to that need at the direction of his boss, the President.

I think we could get a conviction on the charge of market manipulation on the part of this Administration…not that the last Administration didn’t get into this game-playing, as well, when it caved to the environmentalists’ demands.