May 23, 2008

Is Gasoline as Important as Cable TV?


In 1992, the U.S. Congress overrode President George H.W. Bush's veto and passed the Cable Television Consumer Protection and Competition Act. This law, among other things, regulated the price for basic cable television service. The arguments made in favor of cable regulation apply even more clearly today to gasoline. So, is it now time to regulate the price of gasoline?

Basically, the 1992 Cable Act treated cable television as a utility, something everyone needs and which is prohibitively expensive for smaller competitors to produce and distribute, like water or electricity. Congress noted that a relatively small group of cable operators controlled the market for cable tv such they were able consistently to raise prices faster than the rate of inflation. According to Sen. Patrick Leahy (D-VT), "Before the 1992 Cable Act was passed, cable rates were rising three times faster than inflation rates. I do not think you can name a consumer in this country who did not feel that he or she was being gouged."

Hmm, sound familiar?

There are two big difference between cable tv and gasoline which makes price regulation even more applicable to gasoline. First, cable tv has lots of substitutes. Even if the market is defined narrowly as multichannel non-broadcast television programming, cable competes with satellite dish tv service, which has been gaining more subscribers than cable for some time. Plus, a more realistic view of the market in which cable competes would include broadcast television, which still gets the most viewers ("American Idol," the Super Bowl, etc.), as well as DVDs (on which one can rent movies, cable and broadcast television programs), and possibly even other forms of entertainment, like live sports events and, hopefully, blog reading on the Internet.

Second, it's not easy to argue that cable tv is a necessity (I can hear "Flavor of Love 3" fans going "what are you talking about?"), and it's even harder to argue that cable tv is more necessary than gasoline.

Gasoline has few or no competitors to power motor vehicles at this point. Hybrid cars still require gasoline. If drivers ditch their cars to take the bus, most buses run on gasoline. Electric commuter trains are not available to many people, especially those who do not live on the coasts or in large cities. Plus, how would you get to the train station? Bicycles? Horses? I don't think so.

So what we have with gasoline is a product that (a) nearly everyone needs; (b) has no current substitute to power motor vehicles; (c) is controlled by a small number of companies; and (d) has skyrocketed in price, way beyond the rate of inflation.

Maybe we should skip the price regulation and regulate gasoline as a drug.

(photo from atomsmasher.org)

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7 Comments:

At 11:50 AM, Blogger The Ex said...

Controlled by a small number of companies? Hardly. The problem of oil prices simply cannot be attributed to the top three gas companies. What about the thousands of oil companies that drill crude oil every day? Or the hundreds of thousands of oil companies that assist the companies in drilling?

This is a complex problem that unlike cable tv - I'm afraid won't be solved anytime soon. I do wonder however at what point people say enough. 10/gallon? 15? I work for an oil company and it pains me - PAINS ME - to pay for gas with my paycheck from the company that is gouging me at the pump. It's just wrong.

 
At 12:38 PM, Blogger media concepts said...

Thanks ex. But you're aggregating oil production, distribution, retailing, equipment suppliers, etc. I'm talking about the original production. Not only is it controlled by a small number of multinational corporations, some of those corporations are owned by, subsidized by, or work hand in hand with their host countries. We don't have to imagine that it's a cartel. OPEC is an official cartel that makes no secret of setting production limits and prices wherever possible.

 
At 5:56 AM, Blogger Ghetufool said...

tell me one thing. half of your oil imports go to the reserves. why can't you let it go. if you bring down the reserve requirement, you need not import so much of oil and raise the price (and blame india and china for consuming more)?

 
At 12:39 PM, Blogger media concepts said...

I don't think that making changes to the reserve would have any long-term effects, as is the case with increased oil drilling in ecologically sensitive areas. The demand is so far beyond those relatively meager supplies.

The latest math I have read is that the U.S. produces about 8 million barrels of oil a day, uses about 22 million, and imports the missing 14 million. The SPR has a capacity of about 700 million barrels. That's only one months' worth of oil usage in the U.S. So even emptying the SPR totally would not help with supply or demand beyond the immediate short term.

 
At 12:11 PM, Blogger Ghetufool said...

ok. thanks for claring my misconception. many thanks.

 
At 8:35 AM, Blogger hugot said...

Petrol in the US is heavily subsidized. Currently petrol is around £1.10 per liter in the UK thats over twice what your paying in the US (working out to around $8.20). People still drive a mile to their gym in order to run the same distance on a tread-mill, or sit there, parked up with there engines running, and so on. If the price of oil is going to be the catalyst that changes our behavior in regards to energy consumption I think it's going to have to get a lot LOT higher.

 
At 12:54 PM, Blogger media concepts said...

Hugot, I think you're right. And I think it's obvious that the price of oil (and gasoline in the U.S.) will continue to rise, which will lead to larger and larger behavioral changes. We're already seeing the first wave of changes, including dead sales for large SUVs and anecdotal reports of reduced traffic on the highways in major cities such as Los Angeles.

 

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