Gaseous.(oil industry price gouging)

AND we thought the GOP was the party of free markets. Not when it comes to energy policy. We've heard Denny Hastert and Bill Frist demanding an investigation of potential oil-industry "price gouging"; Arlen Specter singing the praises of "windfall taxes" on oil companies; and even President Bush promising to look for "illegal manipulation or cheating related to the current gasoline prices."

While such demagoguery probably isn't a bad way to score political points, it makes the GOP look either deeply cynical or economically illiterate. There's this thing called "supply and demand." Gas is expensive right now because supply disruptions (and fears of future supply disruptions) have caused a spike in crude-oil prices. Oil-company "gouging" has precisely nothing to do with this phenomenon; in fact, it doesn't even exist. The oil and gas sectors' current profit margins are comparable to those of other industries, hovering slightly below 10 percent. Historically, they have actually been lower than profit margins in the economy at large. Slapping a "windfall tax" on oil companies now would amount to telling them that they must suffer losses during lean years but can't make up for them in fatter ones.

That's unfair, but it's also bad policy. Oil companies are willing to make the huge capital investments associated with exploration and drilling because they have a reasonable expectation that the market will reward them. Diminish that expectation and you diminish the amount of oil flowing from U.S.-owned wells. Then we're back to that whole "supply and demand" thing: Supply goes down, price goes up. ...