May 11, 2006
Atlas May Shrug
I might be getting ahead of myself to declare Warren of Coyote Blog to be Atlas, holding the world up. But he may find himself giving up a portion of his business, becuase operating under proposed government regulation is just too risky (italicized portion from this story):
Last week the House of Representatives expressed its collective outrage over high gas prices by voting as a herd, 389-34, to make gasoline “price gouging” a federal felony.
Really. This command and control legislation reads like the kind of law passed by the old Soviet Politburo. If an oil company is found guilty of charging a “grossly excessive” price for gasoline, it could face a $250 million fine and its executives face imprisonment. Even neighborhood service station owners could be sentenced to two years in jail and a $2 million fine for the high crime of charging too much at the pump.
…
My company operates several retail gasoline outlets. We at best break even and probably lose money on the gas, but we continue to sell it to bring people into our stores and because there are so few other local retailers (we are in very rural areas). If this law passes, I am just not going to risk going to jail because some economically ignorant jury in the future can’t figure out that gas is more expensive in rural areas or because some tragic and sympathetic figure decides to sue me. I’m out. And if someone observes that in the rural areas in which we operate, consumers will probably be worse off if we exit, then Congress should have thought of that before they passed this Marxist-populist legislation.
You know what? Good for him. I’m sorry, but I’m not going to risk 2 years and $2 million for a couple of cents of profit on gasoline, and I don’t expect somebody else to do so.
If this passes, of course, it’s just going to hurt consumers. The same consumers that will then scream for more government intervention, further screwing the whole thing up. They don’t understand the implications of voting based on their own economic ignorance, and can’t see that politicians are willing to sell them up the river just to increase their own power.
This legislation, in fact, is a boon to the major gasoline chains. They’re the ones that know that if they get investigated, their armies of lawyers will keep them clean. It’s the little guys, like Warren, who would rather hang up their spurs than face the risk. Increased regulation helps big corporations improve market share, and will only end up creating higher prices and harder-to-find gas for consumers. I said before that this problem will only improve when individuals start to see government as the problem, not the solution.
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One of the reasons oil remains at elevated price levels?
Traders are confident that government officials will find a way to restrict supply (outrageous fines, small guy says, “Screw it.”, etc.) and therefore the price goes up in response. It’s pre-emptive in some respects. Twisted but true.
Excellent post. I think exactly the same way. Economic ignorance will be the death of us all.
Ah, the rule of law. What a country!