It's Not Nice to Fool the Free Market

The economic woes of California are back in the news yet again.  This time it is high gas prices.  Of course, the Golden State usually has the highest prices in the country, but recently prices at the pump have skyrocketed – increasing on average by 50 cents in the last week and reaching almost $6 a gallon in some areas of the state.

The senior senator from the state, Dianne Feinstein has predictably called on the Federal Trade Commission to investigate the possibility of price gouging.  She, like all statist politicians, doesn’t understand the workings of the free market. When their statist schemes backfire, they immediately blame the usual faceless enemies – unscrupulous suppliers, manipulators, and speculators.  Once again the public is being subjected to this tirade when as always the fault lies with Feinstein and her ilk.

You see, California, as this commentator has written before, has a crippling regulatory environment.  The environmental fringe has hijacked state government and squashed all reason and economic sense.   Gasoline suppliers outside the state are unable to ease the burden of short supplies in the state because they are not equipped to produce the cleaner-burning gasoline required by bureaucrats in Sacramento.

And there is a shortage of gasoline right now in California because the state has just enough refining capacity to fill its demand due to stiff environmental regulations.  When Exxon Mobil’s refinery near Los Angeles experienced a power failure which cut production and Chevron’s plant near San Francisco suffered a crude-processing unit shut down due to fire, supply was curtailed and prices rose drastically.

Thus, Feinstein’s faceless, nameless perpetrators of higher gasoline prices are non-existent.  The cause of higher gas prices in California is a lack of supply produced by the policies of statist politicians like her. 

In fact, to increase supply the first thing Governor Jerry Brown did was order regulators to relax smog controls and allow refiners to begin, earlier than usual, producing cheaper winter-blend gasoline.  His actions are an acknowledgement of where the real problem lies – with government policy, not fictitious bogey men.

The free market, like nature, is an all-powerful force.  Human manipulation of either spells trouble.  Politicians will always blame someone else when their manipulations go astray.  Whether it is higher gas prices, housing market busts, or a drop in the value of the dollar, they point the finger at unscrupulous suppliers, manipulators, and speculators.  Instead they should look in a mirror and then point their fingers.   

Article first published as It’s Not Nice to Fool the Free Market on Blogcritics.           

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina