A gouging market.

• Author: Rothschild, Matthew
• Position: Oil companies - Column

Accusing oil companies of price gouging is like accusing sharks of swimming. That s what oil companies do. In fact, that s the imperative of the marketplace: to charge whatever you can get.

When I was taking Economics 101 at college, my instructor told us that on a hot day the ice cream parlor should raise prices. Well, it's a hot day right now, and the oil companies are jacking up the price at the pumps.

If you worship the market, fill your tank and smile.

But the free market is not exactly in textbook shape right now when it comes to oil. Rather than having a multitude of ice cream parlors to choose from, the consumer can select from only a few oil companies, and they own not only the parlor but the cows and the dairies, too.

Plus, there's another big difference between ice cream and oil. The choice of having an ice cream cone is a luxury. Driving a car, for many of us, is a necessity.

That's something the hardcore free market apologists don't grasp.

"Gas station owners cannot farce us to buy gasoline," writes Alex Epstein of the Ayn Rand Institute, in an article entitled "The Myth of Price-Gouging." "They can only offer us a trade, which we are free to accept or reject."

But how free is the independent trucker, or the taxicab driver, or the traveling salesperson? How free is the service worker who can't afford to live in the expensive city where she is employed, so she has to live thirty miles away, where there is no public transportation?

Oil companies know that they have a lock on a crucial product. They're charging accordingly.

Still, fantasies of a free market die hard.

"There is no such thing as 'price gouging' by private business," writes Epstein.

It very well may be that what the oil companies have been doing over the last couple of years does not technically qualify as collusion.

"The real problem is legal manipulation of prices," says Tyson Slocum, acting director of Public Citizen's Critical Mass Energy and Environment Program. "The oil companies have gotten so big they don't need to collude anymore. Advances in computer modeling have really aided the ability of the big companies to game the market."

So game it they do.

And because the five largest oil refining companies in America control more than 50 percent of the market, they can individually decide to limit the supply of refined oil products. If ExxonMobil sees Shell taking gasoline off the market, it can do likewise, and they will all end up making more profits without ever needing to huddle together in a boardroom to fix prices.

Even George Bush, as ardent a defender of the oil companies as ever set foot in the Oval Office, has...