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Oil price mythology keeps Louisiana behind

Economic illiteracy seems to be the theme of this week, from elected officials to guest columnists, although, I repeat one more time, given our state’s fiscal situation it seems in Louisiana to be the theme of the month, year, decade, century …. And it all seems to revolve around the price of gasoline.

This column provides yet another example. Simplistic thinkers who do not understand human behavior in markets, economics, often fall prey to the notion of some kind of conspiracy theory girded by the mistaken notion that some force can control markets and that, ultimately, the consumer is not sovereign. We saw it yesterday, and I’m afraid we’ll see it for some time to come.

This hapless writer seems to promulgate that a conspiracy of oil companies supported by Republicans, especially Pres. George W. Bush, keeps gasoline prices rising over time to hurt the pocketbooks of most Americans (I think; he’s a bit tortured in his presentation but I think that’s where he’s going). To make such an argument requires the establishment of certain assumptions and a peculiar logical train that cannot be sustained.

For one, the assertion that a cycle occurs where gas “prices rise but never fall back down to where they began” happens more intensely and/or frequently during Republican White Houses is highly debatable. If you look at the average prices from 1949-2003 of first leaded regular and then starting in 1976 unleaded regular gas, the average price (in 2000 dollars) under Republicans was $1.50, and under Democrats $1.45 – statistically no different. Further, if you assume it takes two years for a president’s energy policy to work its way into gas prices, by lagging the results by two steps shows that average Democrat price exceeds the Republican average $1.50 to $1.44 (still not a significant difference).

But for the sake of argument, let’s assume there is a significant difference and policies unfold immediately and are immediately factored into price. The reason for that is not some grand conspiracy but because Republican regimes have been marked with more economic prosperity than those of Democrats (especially when lagging equations two years out). Better economic performance means more demand for energy and this demand rises faster than does supply. Hence, to make something clear the writer does not seem to know, price is a function of both supply and demand and will go up under this scenario of economic expansion, typical of Republican administrations.

The most ludicrous part of his argument comes with “Big Oil” making contributions to the GOP, particularly Bush, and the tired, disproven diatribes against Halliburton, showing it controls the White House and thereby Bush pursues an agenda for oil companies against the people. (Never mind that Bush has done much for the “middle class” – tax cuts for most Americans, easing regulatory burdens, and the like).

Let’s see how many oil companies or their organizations were big contributors in the past election cycle. OK, a few business groups, lots of unions, some professions – but no oil companies or their representatives. As far as just Republicans? No, not a single one in the Top 20. As a matter of fact, oil and gas interests gave only $6,690,045 total in the cycle to all Republicans. And this buys commanding influence when Bush alone spent $360 million in his quest for reelection? How idiotic do you have to be to actually believe this drivel?

The writer even is wrong when he asserts “Americans will get used to higher prices for oil and gas for one simple reason: Because we have to.” We don’t – as gas prices have risen, this has created economic incentives to open up new production which promises, as technology advances, to reduce prices to Americans.

One could laugh at this ignorance except it has had a real impact on the misfortunes in Louisiana. Until we educate enough people in the way the world really works, we are going to keep electing enough people who don’t know it themselves and we’re going to keep getting policies that leave this state behind others in economic development.


Teacher unions stall needed reforms; House props up gas prices

(UPDATE: HB 763 went to the floor Wednesday. Rep. William Daniel tried to amend out the most objectionable language to create a floor price. Daniel said he even went to the lowest-cost price in the state and told everybody there they were paying too little. Several others argued this bill and the bad Unfair Sales Act of 1940 would prevent, in the word’s of one, “Wal-Mart from becoming the next Standard Oil.” [I’ll say it again, it’s no wonder we have the fiscal problems in this state with such idiotic thinking.]

The bill author’s, Rep. Taylor Townsend, kept making the asinine remark that to increase competition, government had to involve itself. He seems totally ignorant of the fact that government intervention itself, especially in this issue, is what decreases competition.

This amendment failed, but one of Daniel’s which would have eased the regulatory burden imposed by the bill, succeeded. This made the whole thing slightly more palatable, the only other good thing being it removed authority to enforce it from the Secretary of Agriculture.

The House passed the bill 99-4. It’s better than doing nothing, but hopefully the Senate will do the right thing and amend it to gut the entire 1940 Act.)


House Commerce GOP members vote to limit competition

Confusion reigned at the end of the Louisiana House Commerce Committee’s meeting yesterday, and it just wasn’t in how two bills got dealt with.

Rep. Taylor Townsend’s HB 763 was up first and eventually got approved unanimously, if with minor amendments, by the committee. This bill sets strict and complicated standards by which a price offered by a retail gas seller to which it would have to adhere. Not only would this boost the price of gas by fiat, it would also increase costs by the regulatory burden imposed.

Rep. William Daniel’s HB 183 presented much less of a regulatory burden on sellers and also did not stipulate a minimum price computed through any formula. However, it did forbid selling gasoline below its definition of “cost,” at least for more than two consecutive days if an entity genuinely was not going out of business.

Even though this version amended the Unfair Sales Law of 1940 into a less virulent form than did HB 763, oddly the committee rejected HB 183 on a tie vote while obviously accepted HB 763 which weakens little the old law. Believe it or not, in terms of non-ex-oficio members Republicans actually hold a 10-8 majority on this committee, yet all voted for the bill which would raise prices higher and stifles competition more (although if any of them had a clue they would repeal the law entirely instead of tinkering with it).

If this was a political move to send a more-objectionable bill to the House floor to increase its chances of getting killed, the logic escapes me. Why not rid the chamber of it in committee? And if you had to send a bill that limits the free market to the floor, why not the one that limits the marketplace less? Can somebody explain to me why Republicans who are supposed to be against this kind of thing are for it?

The fact is, the retail gasoline market is simply too competitive for monopoly to form. Further, almost every study of laws like this shows they artificially raise prices by stifling competition. Are our legislators that dense that they can’t understand this and this makes either HB 763 or HB 183 bad law?


Loyola of New Orleans: more "Social Justice" U., less Catholic

Catholics are Catholics because they honor the doctrines of their faith. When they do not, the Church is obligated to point out the inconsistency. Rightly so did the Most Rev. Archbishop Alfred Hughes when he refused to grace Loyola University with his presence at its commencement next week because of the Catholic university's decision to award the Landrieu family an honorary degree in part for their “exemplary” public Catholicism.

Of course, neither Mary nor Mitch Landrieu is an “exemplary” Catholic because they support the infanticide that is abortion of convenience. Loyola, which has run afoul of honoring personages and ideas whose actions and messages are inconsistent with Catholicism, thus takes another step away from being a truly Catholic university.

It would be one thing to bring in a Landrieu for a public policy debate, or another of their award-winners Kim Gandy, president of the National Organization for Women, as a way of stimulating discussion as part of the pedagogical mission. It is another entirely to honor them for work which in part contradicts the very faith the university claims on which its education is based. Why can’t it honor faithful Catholic politicians like U.S. Rep. Bobby Jindal, or cultural warriors who have battled against huge resistance and plenty of name-calling in promoting a Catholic agenda like Phyllis Schafly?


Small step for Wooley; giant leap for Louisiana

At least he did the right thing, only after about two months of unfavorable media coverage, and he doubled the fun. Insurance Commissioner Robert “Pimp(le) My Ride” Wooley gave back to the state the luxury truck he had requisitioned and his year-old luxury truck he also had gotten the taxpayers to buy him. The latter re-gift was interesting in that he could far better justify having that one, so we may conclude Wooley felt he needed to make a large penance for his arrogance.

Perhaps that’s because another high-profile incident occurred not long after his purchase was revealed, where it appeared that Wooley had managed to promote his brother in violation of anti-nepotism laws but again had to back off when word leaked out and the media came calling (thanks in part to the work of one of my former students – take a bow, Michelle). That now has been rescinded and any expanded job description for Rick Wooley has been labeled “temporary.”

It’s an arrogant attitude from this office the state has all too often had to continue to endure, considering the last three commissioners have gone to jail. Wooley’s mentor Jim Brown displays this haughtiness in spades by his continued insistence that, despite numerous trials all establishing reaffirming the decision that sent him to jail, that it was all some big conspiracy and that judges, prosecutors, the federal government etc. all are to blame for his going to prison, not Brown himself. Wooley seems to have learned well from Brown, and maybe even will top him in time if not in jail time (we hope not), certainly in arrogance.