Gasoline Prices

Washington Post business columnist Steven Pearlstein was online Wednesday, May 23 at 11 a.m. ET to discuss the rising cost of gasoline in the United States.

A transcript follows.

Read today's column: A Government Standard.

About Pearlstein: Steven Pearlstein writes about business and the economy for The Washington Post. His journalism career includes editing roles at The Post and Inc. magazine. He was founding publisher and editor of The Boston Observer, a monthly journal of liberal opinion. He got his start in journalism reporting for two New Hampshire newspapers -- the Concord Monitor and the Foster's Daily Democrat. Pearlstein has also worked as a television news reporter and a congressional staffer.

His column archive is online here.

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Arlington, Va.: In this time of big gas prices, I have never been so grateful for Metro getting me to and from work. It honestly gives me shivers to think how much gas money I'm saving.

Steven Pearlstein:... So we won't mind if Metro raises fares by 25 cents next year, right?

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Troy, N.Y.: I thought the government already was in the oil business. At least, the Bush administration is. That's why they invaded Iraq and have Iran in their sights. That's why prices keep going up and up with no end in sight, and with no oversight. That's why only lip service is given to "revising auto efficiency standards" and "ending our dependence on foreign oil." That's why gas guzzler buyers got tax breaks and those of hybrid cars ended and were limited. That's why Cheney met with, oh well, you know the rest.

Steven Pearlstein: Yeah, yeah, I know. We need to get beyond all that now. The mileage standards will be pushed through, one way or another, and my guess is that they will be pretty tough, in exchange for some government help. And I'd take long odds on a bet that says we'll have a federal carbon tax proposed by the next president.

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Alexandria, Va.: I keep reading that oil refining capacity has reached maximum output due to increased foreign and domestic demand. No new refineries have been built since the 1970s, due to expense, environmental codes, etc. and record high gas prices have been a result. With the amount of record profits oil companies have earned, why haven't they forecast the need to keep pace with the building of refineries?

Steven Pearlstein: We should acknowledge that the equivalent of one new refinery has been added to capacity each year for many years as a result of additions to existing refineries and other improvements that allow greater output from the same facilities. So its not true that capacity has been stagnant. But it is surprising that, except for periods of recession, supply has a strange way of remaining just a bit behind demand. You don't find that in most other industries, including other extraction industries, where the boom and bust cycle is very much alive. And there is no other conclusion from this than the industry has become very adept at being an oligopoly, that competes for some things (like supply or retail distribution locations) but doesn't really compete on the basis of price or try to grab market share from competitors by increasing capacity. This is simply irrefutable, in my opinion. It is not illegal, per se, although it begs the question of why federal regulators allowed further consolidation in the the industry, which makes this kind of tacit collusion only easier. But it is effective.

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Fairfax driver: Clearly, the price of gas is being manipulated by the American Oil Cartel. However, I'd have to say that Americans don't really care. They whine and complain, but it has not stopped them from buying their $$ coffee drinks as the drive-thru Starbucks near me is backed-up all day. It has not stopped speeding on Interstates as I am routinely blown off the road by speeding Suburbans, Denalis and Hummers. We may not like paying more, but it sure has not slowed anything down.

Steven Pearlstein: Actually, I think it has helped to slow the economy down, and will continue to do so for the next year as the price increases begin to change behavior over the long term.

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Ashburn, Va.: Mr. Pearlstein, Thank you for taking our questions. I heard a brief news snippet the other day that said that the major oil companies had not built a new refinery in the US in years. Is this true? Would it help the issue of supplies of gasoline and lower prices if the government required the major oil companies to build new refineries?

Steven Pearlstein: There is no way in our system for the government to require construction of new refineries. But the government could construct them, which is essentially what I proposed.

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Stow, Ohio: Seems to me that the oil industry should not control the refinery capacity. Maybe it's time to compel the industry to divest themselves of all refineries, at a minimum. Because the oil industry is global and is capable of manipulating supply, and the product is strategic to US interest, perhaps the government needs to step in to limit their ability to manipulate, assuming that there is enough spine in the government to even consider this.

Steven Pearlstein: Again, I think the solution I propose is most consistent with our market-oriented approach here in the U.S. We don't need to nationalize refining.

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Olney, Md.: It is so disheartening to read articles both in the Post and on other newspaper websites about how families are juggling higher gasoline prices and higher food prices at the supermarket. I even read where a supermarket chain in Michigan, Meijer, is offering customers text messages warning them of higher posted gas pump prices at their service areas within 2 hours of the price increase.

With the start of the summer vacation season this weekend, exactly how high, in your opinion will gasoline prices reach during the summer?

Steven Pearlstein: Have no idea, but it wouldn't surprise me to see another 20 cents per gallon added before things come down again to the high two-dollar range.

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Lafayette, Ind.: In your article you stated "Standard could also build terminals to facilitate importation of natural gas and finance construction of new gas pipelines from Alaska and Canada."

You forget the years of litigation and lawsuits it took the Alaskan pipeline in the 1970s...do you think that the environmental movement has gained or lost power in the last 35 years?

Your article also stated "if you look at the investment the industry is making in its refineries these days, much of it is focused on upgrades that will allow refiners to use less expensive, lower-grade crude oil."

A major reason for this is that nobody wants an refinery built in their backyard. Improving existing refineries is just about the only way to get around this problem. Do you really think that some government controlled company that has to kowtow to politicians is going to have enough clout to overcome the NIMBY crowd???

Steven Pearlstein: The way I propose to deal with the NIMBY crowd is to exempt Standard Oil from state and local regulation, and provide for expedited federal project approvals. You are right that is a problem, and we need to plow through it.

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San Diego, Calif.: Are gasoline prices high because the oil is controlled by a cartel and is this a good reason to breakup the large oil companies and begin a series of "trustbusting"? Also why should corporations be considered "individuals" was that the intent of the Constitution?

Steven Pearlstein: A really aggressive Federal Trade Commission would be reviewing some of the recent refinery mergers it approves, in terms of the behavior of the companies individually and collectively, with an eye to perhaps filing suit to undo one of them. That would send a strong signal to the industry. But we'll have to wait until there is a Democratic president to do that.

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Washington, D.C.: Rather than putting government in the oil business, why not consider eliminating all government intrusion in present day oil industry including the 'tax take?' Remember "if it moves; regulate it too death! If it keeps moving; tax it too death! If it fails; subsidize it!"

Steven Pearlstein: The industry has been arguing for years that the only problem with the oil and gas market is that it is overregulated, and if the government would just stop regulating it, and denying access to drilling anywhere the industry wanted to drill, supply and demand would come into balance. Let me ask you, because I know you are associated with the industry: Do you think the companies would earn higher return on equity and overall profits under the fully-competitive marketplace scenario you fantasize about? And if not, why would any oil industry executive want that? On the other hand, if you think returns and profits would be higher, then you have to assume that (1) prices would be higher (which the rest of us would not prefer) or that (2) volume would be higher (in which case we'd all be contributing even more CO2 into the atmosphere and making global warming even worse). So logically, even if what you say is true (which I doubt), it is not in the public interest to give you the totally deregulated environment you desire.

Add to that the fact which you NEVER, EVER mention in public, which is that the industry benefits mightily by free riding on OPEC price fixing, which is illegal, per se, but can't be prosecuted. In short, you aid and abet a notorious international conspiracy to pick the pockets of consumers everywhere. I'd be very interested to hear what you say about that.

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Baltimore, Md.: Why are the gas prices rising when there is no shortage? Why are there no regulations in place to keep oil companies from gouging the middle class?

Steven Pearlstein: I don't know why we should outlaw gouging the middle class and nobody else. Where does this middle class rhetoric come from, anyway. Is price gouging the poor more acceptable?

The problem with outlawing price gouging is that you can't define it. Does Microsoft price gouge with its highly profitable operating system software? Do the drug companies price gouge by charging $100 for a bottle of pills that, at the margin, cost $1 to produce? Its a slippery slope.

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Washington, D.C.: Gasoline is made mainly from the constituents of crude oil that are removed during refining. Justify the link between the price of a barrel of crude oil and that of gasoline per gallon, considering that gasoline is an un-avoidable by-product of oil refining. For extra credit, explain how it is that refining capacity in the US is dwindling despite the fact that we are importing and storing so much crude oil.

Steven Pearlstein: The price of gasoline and oil sometimes do divert because of the particular supply, regulatory and distribution characteristics of the refining and distribution system. That is, in fact, occuring now, where gasoline is going up faster than oil prices. But it certainly is true that, over the long run, gasoline prices won't go up less than the price of oil goes up.

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Bowie: UPS and FedEx are very good companies, partly because they compete directly with the federal government. I suppose you could say any bank that offers CD's competes with T-bills, and some offer very good rates.

Are there any other companies who've been driven to excellence by government competition?

Steven Pearlstein: Sallie Mae, Fannie Mae and Freddie Mac have certainly helped to keep private competitors on their toes. Now, of course, Sallie is fully private itself. But it did help spawn a big private sector secondary market in college loans.

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Alexandria, Va.: What's wrong with high gas prices? America needs gas at $7.00 a gallon. Nothing else will clear the roads, stop global warming and create public transportation.

Steven Pearlstein: You can make that argument, although $7.00 is excessive. But if you want more expensive oil and gasoline, then let the government get the benefit of those higher prices, through taxes, rather than letting the oil companies take the windfall.

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Washington, D.C.: Would we be better off price-wise if crude oil was traded among the oil companies like it used to be instead of on the New York Mercantile? I believe it was 1983 when oil was first publicly traded commodity on the Mercantile (now NYMEX).

Steven Pearlstein: Not sure. It would cut down on the speculative trading, obviously, which probably adds 10 percent or more to the current price.

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College Park, Md.: If new taxes on oil fall mainly on the refiners rather than consumers, why not just raise the federal tax on oil instead of starting a new oil company? This might not directly benefit customers through lower prices as would a new oil company, but would allow lower taxes, which should ultimately result in more spending power.

Steven Pearlstein: Well, I'd do that, too. But as a columnist, I know something about beating one's head against a brick wall, and joining the line of right-thinking columnist and editorial writers arguing for a gasoline tax falls in that category.

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Kansas City, Mo.: How is it continuing to happen that "Big Oil" manufacturers are continuing to post record profits on a quarterly basis while complaining that "maintenance" and upgrades are costing them so much? I think that it is a travesty for any company to continue to post larger and larger profits at the expense of its consumers. Not that business shouldn't be allowed to proser, but does it really have to happen at the expense of the masses only to benefit the wealthiest of our society.

Steven Pearlstein: Well, welcome to the free market. The thing about oil companies is to remember the old adage, watch what they do, not what they say.

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Baltimore, Md.: Since I paid a price of $1.93 per gallon back in January, prices have risen to, presently, $3.09, on, it seems, nothing more than anticipation by the oil companies of the oncoming summer driving season. What event has affected the supply of crude? Has it been OPEC, attacks on pipelines, fighting in the middle East or elsewhere, aging or insufficient refineries? Or is it greed and gouging?

Steven Pearlstein: Its not greed and gouging. Its call price fixing. OPEC keeps supply tight so it can gradually raise the price of oil over time without throwing the world into a recession that would dampen demand. It is not a whole lot more complicated than that. There is plenty of oil out there to drill for if only the countries and multinational oil companies that control it would compete with each other the way other producers in other industries do. And, trust me, opening up Alaska wilderness isn't a big deal in that context, although I support that, as I do offshore drilling for natural gas.

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Largo, Md.: I have received email "chain letters" urging me to either refuse to buy gas on a certain day or to boycott gas at the any of the major brand stations in order to "hurt the gas companies" and force them to bring the prices down. Do you believe that any of these tactics would have an effect on the price of gas or are we fooling ourselves?

Steven Pearlstein: No, they are really laughable, because people will just delay purchases, not reduce them.

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Baltimore, Md.: Mr. Pearlstein: I have one possibly naive question about the spike in gasoline prices. I hear smart people--and not just those in the oil industry--say it's about accidents at refineries, lack of refinery capacity, problems in Nigeria and Venezuela and on and on. But if there are serious systemic issues, why are oil companies posting record profits? I can understand record revenues given the price rise, but record profits? Can you explain this? Thanks.

Incidentally, I would leave to hear Mr. Bush and Mr. Cheney comment on your "Standard Oil" scenario once they quit hyperventilating!

Steven Pearlstein: Yes, you make an important point. If rising crude were the only cause of high gasoline prices, you wouldn't expect profits to rise, only revenues. Now isn't that strange? Do you think that might be because the refining industry is imperfectly competitive. That is what economic theory would suggest. Its only that the FTC can't seem to find actually evidence of collusive behavior that we haven't done something about that. But you are absolutely right.

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Arlington, Va.: Mr. Pearlstein, I often hear that a gas tax would hurt the poor. But when I was poor in the 1990s, living on about 10-15,000 a year, I found gas prices to be one of the least of my worries. What is your opinion? Would a gas tax hurt poor people? If so, is there a reasonable way to alleviate the pain for low income folks, but still have a gas tax?

Steven Pearlstein: Yes, you can raise the gas tax and at the same time raise the standard personal deduction, which on a net basis, is progressive.

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Anonymous: The old law of unintended consequences. Your environmentalists fought new refineries and today are paying for a scarcity of fuel. Is that not the problem?

Steven Pearlstein: Yes, in my opinion it is. But they're not my environmentalists. I criticize them with great regularity, along with the politicians and regulators who let themselves get pushed around by single-issue advocates. These are multi-factor issues that require tradeoffs between values. Environmentalists don't do tradeoffs and they certainly don't sacrifice environmental values for economic ones. That's why we need officials who look out for the broader public interest, which include environmental values but others as well.

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Otter Creek, Fla.: What is the current estimate of the "peak oil" timeline, how much will it be delayed by biofuels and hybrids and how will peak oil affect the price at the pump?

Steven Pearlstein: Peak oil is a kooky notion with no basis in reality. We have more oil today than we thought we did a decade ago, thanks to better techniques for finding and drilling it. Let's not worry about running out just quite yet.

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Doylestown, Pa.: Are you channeling Woodrow Wilson's Navy Secretary, Josephus Daniels? He proposed the government get into the oil business about 90 years ago. For that matter, so did Winston Churchill -- and he made his dream reality in 1912 with the Admiralty's purchase of controlling interest of BP.

Steven Pearlstein: Didn't know about Mr. Daniels or Churchill. Thanks for that.

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Vienna, Va.: The government operates a health insurance company too, and it operates within a free market. And that health insurance company, Medicare, consistently overpays for services (in office drugs, for example), and is constantly getting dragged to Capitol Hill for one of those kabuki dances, plus is beset with lobbyists, or members of Congress, seeking this favor or that favor. Pardon me, but I'll pass on another government-run enterprise.

To steal a phrase, the problem with capitalism is that it's the worst system -- except for all the others.

I am tired of paying more for my satellite NFL package though. So can the government start broadcasting the Green Bay Packers every Sunday? It would make my home life so much happier.

Steven Pearlstein: You know, the government might consider giving football an antitrust exemption (which is has pretty much anyway) in exchange for a promise not to sell exclusive distribution contracts, so there are multiple sources of the games you want to watch.

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Richmond, Va.: Recently our local newspaper ran a pyramid style graphic that depicted the factors that make up the price of gas (refinery costs for example), but not one of the elements was Oil Company profits.

Could you please tell me what percentage or part of the cost of gas is directly attributable to profit? Thanks

Steven Pearlstein: I don't have the data at my fingertips, but I can report that, for the major integrated oil companies and big publicly-owned refiners, profits this year are up between 50 and 150 percent. And that is on top of last year's record profits. So to paraphrase Potter Stewart, I know when I see obscene profits, and that certainly qualifies.

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Greenbelt, Md.: Could it be that the reason the oil companies have not built new refineries is because they don't want to over-build capacity as supplies dwindle, and the reason that they have invested in the refining or poorer quality crude is because they know that the good stuff is rapidly diminishing?

Steven Pearlstein: Yes, all possible.

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Richmond, Va.:"It would be exempt from all state and local regulation."

To what extent do you believe that state and local regulations are inhibiting/discouraging private oil companies from building new refining and liquid gas importing capacity? I seem to recall a report on the PBS News Hour with Jim Lehrer about a year ago where NIMBY (Not in My Backyard) was pretty much putting a hold on all new refineries & liquid gas terminals (& new power plants).

Steven Pearlstein: That's probably a correct assessment. Local and state opposition is where the problem is.

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Mt. Airy, Md.: Steve -- good piece today, as always. I suspect that your proposal (variants of which have been bandied about for many years) probably wouldn't work, for a number of reasons, but at this point, all options should certainly be on the table.

However, in discussing the lack of new refineries being built by the industry, I think you fall into the same trap as so many economically-challenged conspiracy theorists in Washington and elsewhere. Having both worked in the industry and observed it for the government, trust me when I say that if any corporation felt it would be adequately profitable (long-term, of course) to build new refinery capacity, they would do so. The decision not to is not a result of conspiracy with other refiners, but of conservative corporate finance. The corporate capital budget process (unlike that of the government) is both ruthless and disciplined -- projects such as refineries, with huge funding requirements and long payback horizons, must show expected returns greater than other competing projects, as well as the cost of capital, in order to be approved. It's for this reason, and no other, that oil companies have chosen to put their spending into offshore drilling, or stock buybacks, or simply reduce spending altogether, rather than build new refineries. They are not looking at today's refinery margins, but those projected for the coming decades, which are the ones relevant to these long-term commitments.

Corporations, unlike individuals, don't (and shouldn't!) make decisions based on sentiment. They shouldn't be seen as "good" or, more often in the case of oil companies, "evil" -- like grizzly bears or great white sharks, they are simply trying to survive, in a ruthlessly competitive environment. Corporate officers (and directors) know that if they don't optimize profitability, investors will move their money elsewhere, and they (the officers) will be looking for new employment.

No company has an obligation to build a new refinery in the U.S., just because they have one already. But if the expected profitability is good enough (and government incentives, tax-based or otherwise, can certainly help), some company will do so -- not out of obligation or charity, but simply because they see it as a good decision.

Steven Pearlstein: Notice I didn't use the term evil. And I accept that oil companies are simply behaving as rational profit maxizers, without illegally conspiring to restrain capacity. But i find it curious that with profits margins as high as they have been, it is curious that the hurdle rates used by oil companies to decide whether to proceed with a project are ridiculously high. And I think you need to think harder about the economics here: it is probably easier, at this point, to increase a company's profits by acting unilaterally not to add to supply than it is to increase profits of a company by building a new refinery and trying to take market share. The market shares in any region are now so high, and the economics of the industry are such, that it is silly to risk depressing prices by 10 percent to gain an extra 10 percent of market share.

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Fairfax, Va.: Believable arguments seem to be passionately made each time we face "extraordinary" runups in the price of crude and refined oil. Is there anywhere within either or both arguments that a reasonable person can satisfy himself that he is getting anything close to a straight answer?

Steven Pearlstein: The Department of Energy web site is chock full of price data.

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Interesting Internal Bias: So let me see, Steven. We have massive numbers of people uninsured/underinsured, and what is your solution? Not much. Certainly (gasp), not a single payer health system!!! Such Govt. intervention is neither needed nor desired!

But threaten your ability to mainline gasoline into your veins, and suddenly we need a Govt. Sponsored Enterprise! Anything...anything! Just don't risk my Stupid User Vehicle, cruising in said vehicle, and my nice big house in the burbs!!

Interesting internal bias, Steven. We need massive Govt. intervention to maintain an unsustainable lifestyle, but no Govt. so people can get proper heath care?

Spare me. This is just the invisble hand at work, informing everyone that we can't keep sucking down half the globe's resources with 8% of the total population. People are evntually going to lose the McMansion in Leesburg with the two Stupid User vehicle garage due to simple market forces.

Now we could have been adults, and stopped subsidizing all that gasoline years ago. The vost would have gone up, behavior would have changed, and we wouldn't have funded the oil countries. But we were petulent children who demanded an eternal right to the Imperial Canyonero with the built in pool/bowling alley option package and cheap subsidized gas. So we're going to learn the hard way.

Steven Pearlstein: Actually, I'm very consistent. We have a mixed public private system in health care. And I am recommending a mixed public private system in energy. You want to nationalize health care and energy.

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Laurel, Md.: Love it. But how well do you think Standard Oil would have run the last six years under Bush, Cheney and a Republican Congress?

On a more practical level, maybe we should just all buy stock in the oil companies. The energy sector spider (symbol XLE) has traced the price of gasoline pretty well for five years (i.e. the higher prices are going to the oil companies, not foreign potentates).

If my pump price drops back to two bucks, I'll buy enough shares to hedge the 500 gallons I buy a year. Maybe next election.

Steven Pearlstein: Its a good strategy for you. But if we all did it, it would drive up the price of the spider to the point that it wouldn't work for anyone. Sorry.

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Crossville, Tenn.: Hi Steven,

Thanks for taking our comments and questions. I think we have met the enemy and it is us. We all want low gas prices, yet we are unwilling to purchase and drive high mileage cars. When you see the Smart Cars in Europe and elsewhere and see their gas prices and then come here and see our SUVs and gas guzzlers and hear us whine about our prices, which are lower than most anywhere else, you have to ask if we aren't the problem. I like the muscle cars and the big boats of days gone by, but I am more realistic when I see that the days of the big boats are numbered unless, of course, we are willing to continue to shell out increasingly more for the fuel to run these big hogs. GM and others market economical cars overseas, but don't here - why? Because we don't want them (at least most of us). So we have ourselves to blame and we aren't hurting enough yet to make the changes and demand that Detroit (or Tokyo)provide us with better alternatives. Thanks!

Steven Pearlstein: Indeed.

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Fairfax, Va.: I found your column in today's business section proposing a National Oil Company to compete against the multinational oils US operations rather interesting. If such a company was forced to compete on a level playing field I doubt that the results would be too favorable for your proposed company. I assume that the oil and gas you say the federal government owns offshore and on Federal lands are resources that have been discovered and developed by private companies so that if the government were to take physical possession of them in the ground (rather than after being produced as is the case with royalty production now), the government would repay the sunk exploration, drilling and production costs of the oil and gas reserves they are claiming ownership of.

As to your assumption that the new "Standard Oil" could be capitalized by a cent or two tax on gasoline sales (even assuming that would be all that is required to pay for sunk costs plus new exploration, drilling, production and refining equipment) that would fall on refiners rather than consumers, I'm afraid I cannot trust you on that. Perhaps you can do another column to more fully explain how that is possible.

I also must quibble over your characterization of the oil industry as having reaped windfall profits for thirty years. I have not checked the numbers for thirty years, but my guess is that someone putting a thousand dollars into Washington Post stock thirty years ago would have done as well or better than having put a thousand dollars into Exxon stock at the same time. I am appending some financial statistics stolen from the Yahoo Finance web site comparing current Income Statements for the Washington Post and ExxonMobil. I have added a line to the bottom of each statement that simply shows Gross Profit per Dollar of Revenue. By this metric the Washington Post is equally as guilty of making "windfall profits" as is ExxonMobil, even at a time when newspaper revenues are substantially lower and oil company revenues substantially higher than they have been for the last thirty years. It would be interesting if you could do a column on the profits, using comparable figures rather than gross numbers, of the major newspaper companies over the last thirty years and compare them to profitability of other major economic sectors of US industry. Steel and Autos are a couple that come to mind.

I usually enjoy your columns and have never written a newspaper before, but I think you are a little far out on this one. Particularly, when you propose what would be another huge government subsidized endeavor financed by yet more taxpayer dollars.

XOM

Income Statement

Revenue (ttm): 336.87B

Revenue Per Share (ttm):57.995

Qtrly Revenue Growth (yoy):2.10%

Gross Profit (ttm): 164.38B

EBITDA (ttm): 79.90B

Net Income Avl to Common (ttm): 40.38B

Diluted EPS (ttm): 6.883

Qtrly Earnings Growth (yoy):10.50%

Gross Profit/Revenue $ $0.488

WPO

Income Statement

Revenue (ttm): 3.94B

Revenue Per Share (ttm):412.623

Qtrly Revenue Growth (yoy):3.90%

Gross Profit (ttm): 1.86B

EBITDA (ttm): 652.06M

Net Income Avl to Common (ttm): 311.04M

Diluted EPS (ttm): 32.43

Qtrly Earnings Growth (yoy):-16.20%

Gross Profit/Revenue $ $0.472

Steven Pearlstein: Well, first of all, it was a Swiftian tongue in cheek proposal. Second, the Washington Post was, in effect, a monopoly newspaper for many years and earned monopoly like profits. It was a legally obtained monopoly, but like many regional newspapers, it had no serious competition from other newspapers. So the fact that profits are comparable proves my point, I'm afraid.

Also, Standard Oil would have to pay drillers to extract the oil, just like Exxon or Shell often does. Or it could dvelop its own drilling capacity. I'm not looking to expropriate oil others have found and drilled.

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Anonymous: Why doesn"t the U.S. Government use the Sherman Anti-Trust Act to break up this price gouging Cartel called OPEC??? The second the governmnent convenes a Grand Jury to try the case, the prices on gasoline will fall faster than an Otis Elevator with the cables cut. The reason the prices will fall is that the Grand Jury will start calling witnesses, and you will find Governmnet Officials on the Witness Stand, under oath, and the grand scheme will begin to unravel like a cheap sweater in a laundro- mat.

Steven Pearlstein: I've written that column a number of times. The answer is that the conspirators here are foreign governments, which we can't for some reason prosecute. But I don't know why we can't tell the ministers of those governments, and the executives of those national oil companies, that they are not welcome here in the U.S. and that any American citizens who do business with them are liable to be prosecuted for aiding and abetting an illegal price fixing conspiracy. But what do I know? I'm not a lawyer.

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Atlanta, Ga.: I really can't tell if you are kidding or not. I hope you are kidding. The government should never be in a business where it doesn't have to be. So what if there actually is collusion (which I don't believe)? So what if someone is manipulating prices (which would be quite difficult)? The gov't has no business in this business. Have you ever seen the gov't do a better job with anything than in the public sector?

I have not - that's why I laugh when people say: the govt should...

People are not required to buy gasoline. They just aren't. We are a bunch of lazy stupid people who didn't care when prices were low. We wanted our big cars and we didn't care what would happen. We did not lobby for more fuel efficient cars (i.e., if you just buy them, they will start making more). We did not lobby our state/local/federal govts for mass transit. So now people -complain- that their commute costs so much? Don't live 100 miles from work - it's pretty simple. I live in one of the worst cities for mass transit - yet, I live less than 5 miles from work (as does my husband). I looked for a job close to home and found one. Realistically, there might have been better jobs for me - but I wanted a certain lifestyle.

So boo hoo if you think gas prices are too high. Stop buying gas - no one has a gun to your head.

Steven Pearlstein: You know, I think this notion that the government can't do anything right is one of the most pernicious lies that the Republican party and business types have perpetrated. There are some things government does badly, but lots of things they do right every day. Its a scurrilous attack.

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Washington, D.C.: Steve,

Very provocative column.

I think we need to see more debate on proposals like this, which is actually quite modest compared to other proposals out there to create a Manhattan Project-scale attempt to wean the U.S. off foreign oil in a decade to enhance our national security by reducing the threat of climate change and the commitment to stationing troops in the middle east for the foreseeable future to protect our interests as defined by the oil companies.

Although there have been examples of federally-chartered corporations whose charters build a public purpose into their mandate (e.g. Fannie Mae), that doesn't mean the policy in general is a good one, or that even the management of such companies can't coopt its own operations for less altruistic purposes. Combined with the fact that an across-the-board policy has never succeeded in the U.S. even at the height of the progressive/populist era with the backing of the president (Theodore Roosevelt), the idea seems quixotic to say the least.

Federal chartering of corporations that are directed to serve a specific purpose is not a radical idea. There's Amtrak (created during the Nixon administration) and Fannie Mae, whose charters describe a broader public purpose than the usual Delaware rubber-stamp.

There's a long history of federal chartering, which is described in an interesting book called Taming the Giant Corporation by Ralph Nader, Joel Seligman and Mark Green. (It's worth noting that that is also the name of an upcoming conference Nader is sponsoring here in DC ¿¿" see www.TameTheCorporation.org for details).

The history of this idea reveals that although there have been examples of federally-chartered corporations, that doesn't mean the policy in general is a practical one, or even a good one ¿¿" as we¿¿¿ve seen with Fannie Mae, the public purpose mandate doesn't prevent management of such companies from using it for less altruistic purposes.

Combined with the fact that an across-the-board policy has never succeeded in the U.S. even at the height of the progressive/populist era with the backing of the president (Theodore Roosevelt), the idea seems quixotic to say the least.

But that's one reason why you are right to propose that this policy be taken up when it comes to specific sectors, because it allows for the enhancement of specific public policy frameworks in a time of industry concentration. In his memoirs, former FDA chief David Kessler proposed a similar strategy for the tobacco industry, which by the end of his term he had concluded could not be effectively regulated.

In A Question of Intent, Kessler wrote:

My understanding of the industry's power finally forced me to see that, in the long term, the solution to the smoking problem rests with the bottom line, prohibiting the tobacco companies from continuing to profit from the sale of a deadly, addictive drug. These profits are inevitably used to promote that same addictive product and to generate more sales. If public health is to be the centerpiece of tobacco control, if our goal is to halt this manmade epidemic of the tobacco industry, as currently configured, needs to be dismantled.

He proposed forcing tobacco companies to be spun off from their corporate parents, and called for Congress to charter a tightly regulated corporation, one from which no one profits, to take over manufacturing and sales.

The benefits of this kind of approach are numerous. Federal revenue streams would allow for transition planning to protect tobacco farmers that need support in transitioning to another crop, as well as underwrite public costs of secondhand smoke, currently borne by taxpayers. By owning the production, sales and distribution (much like county liquor stores) it would also avoid the messy debates over First Amendment rights to advertise, by restricting tobacco advertising.

There are other sectors as well where this policy might make sense. I explored this question in a paper published by the Seattle Journal for Social Justice.

http://www.law.seattleu.edu/sjsj/2005fall/cray

Steven Pearlstein: Thanks for that, professor.

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Washington, D.C.: Actually, the inflation-adjusted record of $3.223 per gallon for regular gasoline that the Post cited as coming from the U.S. Energy Information Administration was in 2006 dollars, not in today's dollars. It has been reported elsewhere (e.g. the Denver Post) that EIA has recalculated the March 1981 monthly average price of $1.417 to be equivalent to $3.292 per gallon in May 2007 dollars. With EIA's retail survey showing a price of $3.218 per gallon, there is still a little more ways to go to see a new "record".

Steven Pearlstein: However you calculate, we'll get there in the next two weeks.

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Silver Spring, Md.: I see this problem as a "mosaic," rather than having one main culprit. It's the environmentalists, with their draconian proposals and their incredibly court-clogging lawsuits; it's the oil companies for not investing more in refining capacity; it's politicians of BOTH parties who would rather worry about not gutting their "fatted calves" than do what's right for the American public; and it's all of us for wanting to drive our SUVs, vans and minivans, live in large homes and expect to pay $1 a gallon.

The world's developing population (India, China) is exploding. We're not going to drill our way out of this, and we're not going to be able to conserve our way out of this. We're going to have to do BOTH.

Steven Pearlstein: Fair enough.

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Washington, D.C.: Love the folks saying that they are "your environmentalists" and talking about the lack of new refineries. We've increased refining capacity, despite the enviros. As for NIMBY reactions to new refineries, how about siting a few at the refinery sites that the oligoplists have shut down over the past 20 years since consolidation? You mmight even find some communities that would prefer the sites to be actively managed and employing people rather being wastelands.

Steven Pearlstein: You might find such community, but it would be unusual.

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Annandale, Va.: I was surprised by Washington DC post about eliminating governement from the oil industry.

If I remember correctly, the history of the oil industry in the late 1800's was that a lot of companies went belly up. The free market ruined a lot of people financially. (I grew up in a town in western PA that had oil derricks all over the place around 1900).

Steven Pearlstein: That was when the industry was competitive, with lots of small operators. The industry is now much more consolidated and restrained.

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Arlington, Va.: Steven:

Instead of involving government in another private enterprise (gee, the Post Office, Sallie Mae, Fannie Mae and Fannie Mac have all worked out so well), why don't you consider a simpler and better alternative -- have one consistent set of standards for refining gasoline and other petroleum products instead of allowing every state (and some metropolitan governments) to have their own standards? A lot of existing refining capacity is wasted because refineries are too busy making 50 or more diffrent types of gas. Another ancillary benefit -- temporary local supply problems due to weather or other natural emergenices might be solved faster because gas could be shipped from states outside the disaster area.

Steven Pearlstein: I'm for a single standard. Federal pre-emption is a good thing in this case.

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Steven Pearlstein: That's it for today folks. Good discussion. Hope to "see" you next week.

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