Wednesday, May 1, 1996 - Page updated at 12:00 AM

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Letters To The Editor

Paying More At The Pump -- The Only Mystery Related To Price Of Gas Is Why It Costs So Little In The United States

Editor, The Times:

Don Hannula's outrage (April 25) at the recent spurt in gas prices is impotent and confused. Don says, "Big Oil is reaching into our wallets again."

No, the only ones reaching into our wallets for gas money are us. If you don't want to pay $1.59 for unleaded, then don't. Unlike taxes or armed robbery - and I realize I'm splitting hairs with that distinction - the choice is completely yours. (If he wants to be outraged about something, how about taxation at all levels approaching 50 percent of the GNP?)

If Don or anyone else keeps buying gas, then it is inarguable that they value a gallon of gas more highly than they value their $1.59; if they did not, they would not make the trade.

Don says, "Gas pricing has always been one of the big mysteries of our time." To whom? The only mystery to me is why it is so cheap given that demand remains nearly constant regardless of price. Gas has always been cheapest in the U.S. and, until the recent increases, was at a historical low in this country (adjusting for inflation). So what if oil companies have "a long history of cooperation"? For all anyone knows, that cooperation has kept production costs and prices down.

Anybody is free to pump oil out of the ground, or buy oil to refine, or start their own chain of gas stations if they think they can make or sell gas cheaper than that ol' bogeyman, Big Oil. That no one is rushing to do so should tell us something. (Would you invest in a company that claimed it could produce and/or sell gas cheaper than ARCO and Exxon?)

We know there's no cartel at work because the failure of OPEC proved once again that monopolies and cartels cannot exist in a free market (government protection is required). Some cartel member will eventually undercut the cartel, and demand will slacken as alternatives are found. The higher the price goes, the more incentive there is for both. All OPEC succeeded in doing was destroying the market for petroleum. Goodbye Cadillac, hello Pinto. Oil prices still have not recovered.

The beauty of a price system is that no one needs to ascertain what a "fair" price for anything is, which is good because it is impossible; the Soviets tried for decades and could not do it. Their ruined country speaks to the folly of trying. The price is all the information you need. If it can be done cheaper, someone will do it. Buy it from A, buy it from B, buy something else or nothing at all. Me, I'm riding my bike to work. Bill Muse Seattle

Copyright (c) 1996 Seattle Times Company, All Rights Reserved.


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