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Commentary By Max Schulz

Congress and Gas Prices

Gas prices are through the roof. Again. And like the patient whose doctor taps his knee with the hammer, Congress reacts with a reflexive jerk, bereft of any thought or consideration. The response of our elected representatives to high pump prices is to issue a slew of ill-conceived policy proposals, fueled by outraged ignorance, which ultimately will do nothing to solve our nation's energy problems. In fact, they may make them worse.

The average price of a gallon of gas recently jumped to $3.22 per gallon, nearing the all-time inflation-adjusted high set in 1981. It's worse in certain parts of the country. Some Californians have seen prices top $4 per gallon.

Leave aside the fact that these high prices, while unpleasant, are not actually hurting all that much. The economy is going gangbusters, and the average American spends less of his disposable income on energy than during the oil shocks of the 1970s. And even with these supposedly outrageous prices, we're not really driving any less.

Nevertheless, Congress is rushing to legislate "solutions" to the high price problem. One proposal passed by the House would make gasoline price gouging a federal offense. The government would prosecute anyone selling fuel at a price that is "unconscionably excessive" or taking "unfair advantage of unusual market conditions." Vague enough for you? Supreme Court Justice Potter Stewart famously wrote that he couldn't define pornography, "but I know it when I see it." Enactment of a price-gouging law will tie up the courts, with judges scratching their heads to decide if, where and when they see it.

The idea that gasoline retailers or the large oil companies are setting prices is patently absurd. The more than 100,000 gasoline retailers in the United States are famously competitive. They are cutthroat, not collusive. Any attempt by one to set overly high prices will be punished by competitors and the customers they entice away. Big Oil, meanwhile, doesn't cause high prices. Rather, they are the beneficiary of them, seeing investments they made long ago come in big now that the worldwide price of oil has risen.

The high gas prices we are paying are set not by any one entity or even any one factor, but by a multitude of factors, such as refinery outages around the nation this spring, the federal government's ethanol mandate, the onset of the summer driving season, and the more than two dozen different blends of gasoline mandated by Washington.

But the real driver of the price of gas is the price of oil. The oil price is set on the open, global market, a function of the available supply and tight demand. That price has been determined in recent months by the strong economies in the United States and in India and China, by production mishaps in Nigeria and Venezuela, and by general Mideast strife and fears of terrorism. No single entity can dictate the price of oil -- not OPEC, not ExxonMobil and not the president. The global energy market is bigger than any of them.

Another congressional stunt would amend the Sherman Antitrust Act to go after the OPEC cartel for, well, acting like a cartel. OPEC is made up of nasty countries like Saudi Arabia, Iran and Venezuela. They band together in an attempt to limit their oil production and keep prices at nice, high levels. The House voted overwhelmingly to let the Justice Department sue OPEC for using anticompetitive measures to drive up prices.

While it is true that OPEC's machinations play a role in boosting the price of oil, it is unclear how this legislation would change that. Attempts to sue OPEC for damages would do nothing to lower oil prices. However, they would effectively kill the notion of sovereign immunity, exposing Americans and their companies and assets overseas to predatory and capricious governments.

If this legislation passes, as American Petroleum Institute CEO and President Red Cavaney noted, Congress itself might be susceptible to anti-trust prosecution. Congresshas consistently blocked energy production off most of the nation's coastline, not to mention in the Arctic National Wildlife Refuge in Alaska. By withholding those reserves from the world market, isn't Congress helping to drive up the prices we pay at the pump?

Yes, gas prices are high. But lawsuits and prosecution are not the answer. If Congress really wanted to lower prices, it would untie the hands of America's petroleum industry, and it would untangle the morass of regulations and mandates that make refining oil into gasoline such an expensive proposition.

This piece originally appeared in Washington Times

This piece originally appeared in The Washington Times