The bill calls itself the Oil and Gas Industry Antitrust Act of 2006, and is sponsored by Senators Arlen Specter (R-PA), Herb Kohl (D-WI), Mike DeWine (R-OH), Patrick Leahy (D-VT), Dianne Feinstein (D-CA), and Richard Durbin (D-IL).
Here is how the bill begins:
(a) IN GENERAL.–Except as provided in subsection (b), it shall be unlawful for any person to refuse to sell, or to export or divert, existing supplies of petroleum, gasoline, or other fuel derived from petroleum, or natural gas with the primary intention of increasing prices or creating a shortage in a geographic market.
(b) CONSIDERATIONS.– In determining whether a person who has refused to sell, or exported or diverted, existing supplies of petroleum, gasoline, or other fuel derived from petroleum or natural gas has done so with the intent of increasing prices or creating a shortage in a geographic market under subsection (a), the court shall consider whether–
(1) the cost of acquiring, producing, refining, processing, marketing, selling, or otherwise making such products available has increased; and
(2) the price obtained from exporting or diverting existing supplies is greater than the price obtained where the existing supplies are located or are intended to be shipped.
You can see the complete nonsense of this standard by considering what is supposed to happen in a correctly functioning market whenever there is any change in the conditions of either supply or demand. To take one arbitrary example, suppose there is a fire at a refinery in Philadelphia. The basic physical problem that the fire would cause is that there is no longer enough gasoline for people in Pennsylvania to go on doing things as they were. What would the senators propose we do about this problem?
I’m supposing that even Senator Specter (R-PA) would figure out that, in this situation, gasoline has become much more valuable to the people in Pennsylvania than it is to the people in New Jersey. What the senators and society should want to see happen is for some refineries to withhold some of their product from New Jersey in order to ship it to Pennsylvania. As a result, the people in New Jersey will have to pay a slightly higher price– which they should, because this item has become more valuable than it used to be. By spreading the burden around, the people in Pennsylvania would be spared a major crisis, and a potentially huge problem has been converted into a minor nuisance.
Now, what might persuade the New Jersey refineries to take this action that would unambiguously be to the benefit of Senator’s Specter’s constituents? Is it a spirit of comradery with their fellow mid-Atlanticans? Or is it the fact that the New Jersey refiner would say, “gee, if I sell the gas in New Jersey I only get $2.50 a gallon, whereas if I sell it in Pennsylvania, I get $5.00 a gallon. I’m therefore going to sell all my gas in Pennsylvania, and only sell to New Jersey if the price here gets higher.”
This is a textbook example of how a perfectly competitive market is supposed to cope with the problem. Specter’s bill, as I read it, would essentially prohibit markets from functioning.
It seems to me what we really need is to prohibit the Senate from functioning.