Biden’s FTC charade won’t lower gasoline prices

.

With the price of a gallon of gasoline up more than a dollar in the last 12 months, averaging around $3.40 across the nation, and consumers fuming about inflation, President Joe Biden has chosen to follow the typical political strategy: Blame the problem on gasoline producers and sellers and call on the Federal Trade Commission to investigate the industry for possible price gouging. Putting the industry in the spotlight will call attention to the billions of dollars oil companies are making, humiliate executives for earning so much, and remind ordinary people far and wide that the government will bring relief. It’s good politics.

Most likely, when all is said and done, the FTC’s investigation will generate some long reports and testimony and identify some anomalies in the pricing data. But in the end, it will tell us that what we have is a problem of supply and demand.

The report may not put it that way. But we can be assured that when the government’s Green New Deal policies lower supply by discouraging fossil fuel production and when COVID-19 relief policies up demand by providing trillions of dollars for consumers to spend, something has to give in the prices we pay. Supply contracts, demand expands, and the price of gas goes up.

Yes, we’ve seen this Shakespearean tragedy before, but not always with an ordered FTC investigation. A few weeks ago, rising meat product prices were the burr under Biden’s saddle. Before that, during the Trump era, it was drug prices that had to come down, Canadian wood and dairy prices that needed to go up, and production of aluminum, steel, ventilators, and automobiles that needed fixing.

Long before all this, back in the Reagan years, it was congressional concern about life insurance pricing that led to an FTC investigation. And in the Carter years, it was unhappiness with funeral home pricing and car dealer marketing tactics that led to FTC investigations and rule-makings.

Indeed, the political response to perceived market inequities is so commonplace that regulatory scholars have given the process a name. The late law and economics scholar and FTC official Fred McChesney described it as a way for politicians to get “money for nothing.”

Let me explain. Politicians need campaign contributions if they are to gain and keep office. Businesses and industries can benefit from government action skewed in their favor in one way or another, and they also need to hold on to earnings as much as possible so that they, too, can keep their places in the sun. A new regulatory threat brings a predictable lobbying response and expenditure: To avoid new compliance costs or endless infighting, businesses will make political contributions so that the politicians, regardless of their public statements, ultimately do nothing.

We know, reaching back to John D. Rockefeller’s political battles, that the petroleum industry is a seasoned Washington player. Making regular campaign contributions is standard fare for the industry. That is true for many other industries. The continual flow of political payments may be thought of as an effort not just to get some new beneficial laws passed but to avoid the passage of laws and regulations that will prove harmful to the industry.

Businesses have every reason and incentive to do this and are used to the public’s scrutiny. None of this is to say that Biden will surely cater to this particular special interest. The point is that we should not always view the political showmanship involved in such matters as anything more than it is.

Bruce Yandle is a distinguished adjunct fellow with the Mercatus Center at George Mason University, dean emeritus of the Clemson College of Business and Behavioral Sciences, and a former executive director of the Federal Trade Commission.

Related Content

Related Content