Monday, May 16, 2011

Leland Conway: Jack Conway misses the mark on gas price investigation

Leland Conway, co-founder and executive editor of and host of the Pulse of Lexington on News Radio 630 WLAP, allowed the Bluegrass Institute to repost his recent column in an effort to help keep Kentuckians informed and up-to-date on the latest issues.

On my radio show last week, I called on Attorney General Jack Conway to address the issue of high gas prices. I pointed out that a few weeks earlier, he and Governor Steve Beshear had taken to the stage to announce that they were “investigating” possible price gouging. I wondered why they had disappeared since then.

As if on cue, Conway came out the next day with accusations of price gouging and manipulation against big oil. He misses the mark. The real gouging that is going on is the EPA’s sustained attack against the American energy industry.

The EPA is regulating American productivity out of existence and most politicians are standing by and watching while the damage is being done. At best, we get a nonsensical parade like the one from Jack Conway and Gov. Beshear where they come out and do the “gas gouging” dance and throw subpoenas for big oil around like confetti on Cinco de Mayo. Meanwhile the EPA continues its destructive slash and burn “Sherman’s march” against energy.

You don’t have to look very far to find an example of the EPA’s heavy handed tactics. A few weeks ago, Shell Oil Company packed up its toys off the North Coast of Alaska and left for sunnier seas in other countries, where they wouldn’t be harassed by the energy terrorism being practiced by the enviro-jihadi’s at the EPA.

They had been operating on the good faith of the U.S. government that they could drill in an area leased 70 miles off the north coast of Alaska. After spending $2 billion on the permitting process and $2 billion more on the exploration process, the EPA changed the rules of the game at the last minute and yanked their permit just before drilling was to begin. Shell was out of luck and out $4 billion dollars and the EPA walked away with half the money.

Closer to home, the Spruce Coal mine in West Virginia recently experienced the same thing. After spending millions of dollars and years of jumping through hoops for the government, at the last minute, the EPA yanked the permit and walked away with their money. In both cases jobs were sidelined and the supply of American energy tightened.

If a private business were to engage in the kind of extortion and fraud that the EPA is engaging in, there would be indictments, perp-walks, and jail time.

So what does all of this have to do with the price of gas? In addition to tightening supply and increasing the cost of production on the drilling end, the EPA is also messing with your wallet on the pump end.

As one industry official relayed, the EPA’s requirements related to winter and summer fuel blends (and the conversion windows from one to the other) creates opportunities for supply shortages and gouging.

EPA regulation distorts the wholesale market where regional-monopolies in the supply chain are created. For instance, Louisville and Northern Kentucky have clean fuel blend requirements not required in other areas of the state. Because multiple blends are required, it keeps multiple wholesalers from entering the market. No matter who you buy your gas from in Louisville for instance, there is only one supplier.

The truth is, if there is any price gouging actually going on, it’s made possible by government stifling competition and over regulating the energy industry.

Gouging cannot happen without collusion or monopoly. Competition decreases the chances of either. When the government increases red tape and decreases supply, they also discourage competition thus increasing the chances of conspiracy.

If Jack Conway really wants to get to the bottom of high gas prices, he’d be better off fighting excessive regulation and the EPA than the energy sector.

1 comment:

Anonymous said...

Great article.