A Case for Gasoline Price Controls
by Gene C. Gerard on Oct 3, 2005
As gasoline prices continue to rise, Americans are looking to President Bush to do something that will lower them. What should he do? Limit oil profits and lower the cost of gasoline. There’s strong precedent for both.
During World War II, President Franklin D. Roosevelt successfully cut back many consumer prices. Bush frequently compares the war in Iraq to World War II. Last month, at a ceremony commemorating the 60th anniversary of the end of World War II, he remarked, “We are again a nation at war. Once again, war came to our shores with a surprise attack that killed thousands in cold blood.” If we’re truly engaged in another global conflict, then President Bush should lower the cost of gasoline.
Since the summer of 2004 gasoline prices have risen 44 percent. After Hurricane Katrina hit the Gulf Coast, the price of gasoline skyrocketed. The oil companies Citgo, Mobil and Marathon all increased their per-gallon gasoline prices by an average of 45 cents. In Georgia, gasoline prices at some stations exceeded $6 a gallon. In the wake of Hurricane Rita, gasoline went up by 30 cents in Texas. Given these increases, Mr. Bush has the chance to limit gasoline prices, just as FDR did in our last global battle.
As is happening now, the cost of gasoline and many other items soared in World War II. Corporate profits more than doubled between 1939 and 1943. As a result, in 1941 Roosevelt created the Office of Price Administration (OPA). That agency was given the authority to fix the price of a product at a level it determined to be “generally fair and equitable.” Congress gave support to this new governmental agency by passing the Emergency Price Control Act in 1942.
The OPA also had the authority to sue corporations and retailers for damages if they violated the price limits. During the last year of World War II more than 71,000 retailers were forced to pay a total of $5.1 million for excessive prices.
Recent polls have shown that Americans consider gasoline prices to be one of the most pressing issues that Bush must address. However, the only actions the president has so far taken to lower the cost of gasoline have been to release a tiny portion of the national oil reserves and to urge people to drive less. Yet he could do more. During the World War II polls showed that the public wanted the government to limit the prices of many commodities. Consequently, the OPA simply froze most prices at their March 1942 level. Although some loopholes allowed the cost of a few items to continue to rise, most prices remained flat.
Today, oil companies would almost certainly complain that government limitations on profits and prices violate their rights. Businessmen made the same objections in World War II. However, the Supreme Court disagreed. In the case of Yakus v. United States, the Court ruled in 1944 that Congress could make the violation of an administrative regulation a crime.
Oil companies have made huge profits in recent years. Exxon Mobil has seen a 32 percent increase in its profits since 2004. ConocoPhillips has enjoyed a 56 percent increase in profits since last year. We shouldn’t be surprised. There’s no check on them.
Corporate profits increased dramatically after World War II ended and the OPA was abolished. In the year following the end of World War II consumer prices rose 67.4 percent. One of the most significant accomplishments by the Roosevelt administration in World War II was holding down prices. Bush should do the same now.
President Bush claims that the war in Iraq and against terrorism is a global battle similar to the Second World War. If that’s the case, he should insist on limiting soaring oil prices. Doing so in World War II successfully lowered the cost of gasoline. There’s no reason Bush couldn’t do it again.
Gene C. Gerard teaches American history at Tarrant County College in Arlington, Tex., and is a writer for the History News Service.