WASHINGTON -- The White House has officially come out against the price gouging provisions of the energy bill passed last week by the U.S. Senate. Those provisions make it unlawful to charge an "unconscionably excessive" price for oil products including gasoline and give the federal government new authority to investigate oil industry market manipulation.
In response, the president's Council of Economic Advisors (CEA) has issued a report, A White Paper on the Economic Consequences of Gasoline Price Gouging' Legislation, which argues, The problem with [image-nocss] this legislation is that terms like price gouging' and unconscionable' have no economic definition. As such, there is no economic evidence that can establish or refute claims of gouging or unconscionable behavior.
It also argues that such legislation will harm the economy generally and specifically will harm driversthe very people the bills are intended to protect.
Such legislation, it said, that puts controls on prices exacerbates shortages and could increase lines at gas stations, as occurred in the 1970s. And the difficulty in defining gouging would create an unnecessary regulatory regime with potentially high litigation costs and great uncertainty for sellers, enforcement agencies and the courts. These added costs and uncertainties would deter investment in new supply, increasing prices in the long run.
The report concludes, Experience has shown that allowing the market to set pricesthe principle that forms the basis of our nation's free-market systemis the most efficient and effective method to allocate scarce resources, and that existing laws already prevent anticompetitive behavior.
The Senate billpassed last Thursday by a vote of 65-27also includes an increase in automobile fuel economy and a requirement for large increases in the production of ethanol, among other provisions.
Click here to view the full text of the CEA white paper.
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