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The Man
Never mind issues like charter reform, a new NFL franchise, a looming housing shortage or even the public schools. When it comes to getting Angelenos really riled up, just mention gas.
The past month or two of sharply higher pump prices has led to the predictable public outcry and many of our elected officials are lending a sympathetic ear. Last week, two state Senate committees heard testimony from industry and government officials on whether the recent price surge amounts to gouging. Also, there were calls for a federal antitrust investigation into oil companies’ pricing practices, and even the L.A. City Council got into the act, passing a resolution backing last Friday’s “Great American Gas Out.”
Expressing outrage over high gasoline prices is one of the safer political stances you’ll come across. Oil companies are easy targets because they are so big and with recent mergers, getting bigger all the time. They also are typecast as among the more evil members of corporate America, going back to the days of John D. Rockefeller and America’s most powerful and feared monopoly, Standard Oil.
“The present dramatic increase has stirred up frustration and resentment similar to that of the energy crisis during the 1970s,” reads the council resolution, which was drafted by Councilman Joel Wachs. “An angry public is demanding solutions. They want their voices heard.”
Of course there will be solutions. Specifically, prices will start going down (they already have). But it has little to do with boycotts or public outrage, and everything to do with the intricate way in which gasoline prices rise and fall.
It should go without saying that a gallon of gas remains one of life’s greatest bargains. Go back 20 years or so and the price of regular unleaded pretty much has stayed within the narrow price range of between $1 and $1.50 even in 1996, when reformulated gasoline was introduced in California. When considering additional factors, such as the rate of inflation and the prices that motorists pay in other countries, a $1 to $1.50 pump price is all the more remarkable.
As for the most recent run-up, myriad explanations have been offered, including a refinery fire, untimely closures of other facilities, and a jump in the price of crude oil. There is little reason to doubt these explanations, and even state Attorney General Bill Lockyer, whose office has been investigating gasoline pricing for more than a year, acknowledged last week there is no evidence of price fixing or other crimes. “It’s very hard to prove that the oil industry colluded to fix prices,” he said.
In fairness, there are many mysterious aspects to pricing gasoline such as the fact that the amount paid at the pump will often not jibe with what refiners and retailers paid to get it there. But in the end, two factors override all else: There is a ton of available supply (after allowing for occasional refinery bottlenecks), and the business is intensely competitive. At intersections where there are two or three gasoline stations, that competition gets played out every day of the week.
There are lots of inequities worth getting riled up over these days. The price of gasoline doesn’t happen to be one of them.
