Economist: Rising gasoline prices are nothing to get pumped up about - Coppock: Claims of price gouging are inaccurate

www.wnewsj.com Fri, Mar 14, 2003, 09:19 PM by Jeff Hibbs

March 14, 2003 - Claims of gasoline price gouging are examples of politicians and consumers getting pumped up over nothing, an economist told the News Journal Tuesday. "In 1982, a gallon of gas cost on average $1.40. Since then, the consumer price index has doubled," said Lee Coppock, a professor of economics at Hillsdale [Michigan] College and adjunct scholar with the Buckeye Institute. "If you look at it, as long as gas remains below $2.80 a gallon, it’s still gone down in real terms. If somebody was to buy Gatorade by the gallon, it costs about $10 a gallon. Vicks Nyquil costs about $180 a gallon. Pepto-Bismol costs about $125 a gallon. So, just be glad that your car runs on gasoline." Allegations of gouging at the pump last surfaced in the wake of the Sept. 11, 2001 terrorist attacks. Throughout the country — including in Wilmington — gasoline prices soared as motorists flocked to the pumps. In Wilmington, the cost of a gallon of gasoline doubled at some locations. Coppock defended retailers’ decisions. "Put yourself in their position," Coppock said. "You’re sitting here, and in one afternoon all you know is this: some guys from the Middle East have just bombed the World Trade Center, and you don’t know where your gasoline is going to come from in the future. You’ve got some in the ground, but you have no idea where that’s coming from in the future. You don’t know what it’s going to cost, because you know there’s going to be some turmoil in the Mideast and you know the price of crude oil is going to rise. "So, what are you going to do to make sure that you don’t run out of gasoline, so that you can at least sell something? I think those guys are the ones that are getting the squeeze. They’re in a very risky environment. They’re just reacting as rational businessmen." The potential for conflict in the Mideast and labor problems in Venezuela will likely result in continuing increases in gas prices, Coppock said. But he said he doesn’t expect to see huge or long-term jumps or gouging as end results. "I don’t believe so. I think that we should be very surprised if we don’t see gas prices rising," Coppock said. "The main reason is the big uncertainty with regard to Mideast conflict. If you look at an indicator to see if that should affect gasoline prices, you would look at crude oil prices, which have risen above $37 per barrel now. And they were less than $20 about a year ago. So, you would assume that gas prices should rise, just to reflect an increase in cost. Retailers cannot just give this stuff away." Contrary to conventional thinking, Coppock said the purchase of gasoline is a "voluntary process," one that works against the argument of price gouging. "I think people often times think, ‘Well, gas is a necessity. We certainly have to have it.’ And certainly, to an extent, that’s true," Coppock said. "But we can change our behavior to affect the amount of gasoline that we consume. We can carpool. We can ride some sort of public transportation a lot of times. Or, in the long run we could live closer to where we work or where we commute to on a regular basis. "And we can buy different kinds of automobiles. You look around and you see people buying SUVs, you see people buying cars that are not in any way conserving, as far as gasoline is concerned. It’s not logical to term a voluntary transaction, which people do not have to undertake, as gouging from one party to another."