How do politicians get away with blaming others for the consequences of their policies?
In response to $6 per gallon gasoline prices, which are nearly 70% higher than the $3.81 national average, California Governor Gavin Newsom will convene a special session of the state legislature in December to enact a “windfall profits tax” on oil companies that he said are price gouging.
“Crude oil prices are down but oil and gas companies have jacked up prices at the pump in California,” said Newsom. “This doesn’t add up. We’re not going to stand by while greedy oil companies fleece Californians.”
But there is no evidence of illegal price setting, and a new tax on oil companies would increase prices further.
Last week, a federal judge in San Diego issued a 103-page ruling dismissing a class-action lawsuit that claimed traders at oil companies had colluded to keep prices high. The scope of the case was massive and spanned seven years of litigation.
As for a new tax, a 2006 report by the nonpartisan Congressional Research Service found that a new windfall profit tax on oil companies, which had been in place in the 1980s, would have “adverse economic effects,” including higher prices, lower domestic production, and increased foreign imports.
The San Diego judge did find that oil companies had coordinated refinery operations, and it may be appropriate for governments to impose a tax on a company when it is engaged in monopolistic or cartel behavior.
But the San Diego judge found no evidence that oil refiners deliberately create shortages to raise prices. “Antitrust wrongdoing consists of concerted action pursuant to an illegal agreement, not independent profit-maximizing actions based on market conditions,” she wrote.