Don Boudreaux Clobbers O’Reilly For Dumb Statements On Gasoline Prices

There is nobody – nobody – worse on the economics of oil and gas than Bill O’Reilly.

Three years ago we got a taste of his stupidity on this issue…

And of course Neil Cavuto, who actually understands economics, took him to school.

You’d think he would have learned something from that beatdown. He didn’t. As soon as oil and gas prices went back up, O’Reilly went right back to his screed about how evil the oil companies are.

(Link in case the embed doesn’t load)

Well, Louisiana’s own Don Boudreaux, the celebrated economics professor at George Mason University whose Cafe Hayek blog is a must-see, laid into O’Reilly today about the fresh round of idiocy emanating from his show on oil.

You’re all lathered up[1] because U.S. oil companies are exporting much of their refined gasoline and heating oil to other countries and thereby putting upward pressure on fuel prices here in America.  You conclude that these companies have a moral obligation not to export so much.

Your economics is wrong and your ethics convenient.

First some economics.  Selling in the global market encourages firms to build larger factories and refineries that, in turn, enable outputs to be produced at lower costs per unit.  So while in the short-run rising exports of oil products can cause fuel prices here to spike, the long-run effect might well be lower prices because of larger, more-efficient scales of operation.  Also, more exports of fuel products means more imports of other goods and services.  The result is lower prices in America for consumer goods such as clothing and furniture, as well as lower prices of inputs such as steel and industrial machinery used by American factories.

I was amused, by the way, that in your Feb. 17th discussion with Lou Dobbs[2], Mr. Dobbs shared your anger at rising U.S. oil exports.  This is the same Mr. Dobbs who repeatedly complains that the problem with America’s involvement in the global economy is that foreigners stubbornly refuse to buy sufficient amounts of American exports.  Go figure.

Now about your ethics.  You’re paid so handsomely because there’s a large nation-wide demand for your commentary and bombast.  In your career you’ve worked for broadcasters in Boston, Dallas, Denver, Hartford, and elsewhere.  And before moving to Fox you were a correspondent for ABC News.  You apparently never hesitated to sell your product to the highest bidder; you never hesitated to export yourself from one market to another in search of higher pay; you never resisted the bidding for your services by buyers (i.e., employers) far and wide which put upward pressure on the amounts of money that you are paid, both to appear on television and to deliver lunch and dinnertime speeches.  So I ask: are you guilty of an offense against those many Americans who – as a result of your responding to market signals regarding the value of your services – must now pay higher prices for the privilege of hearing your commentary?  Should you return to your long-ago job at a local Scranton television station, at your long-ago lower salary, and apologize to the good people of Lackawanna County for your greedy and evil habit of exporting yourself to wherever and whoever offers to pay you more money?

Spot on.

O’Reilly should shut up about oil. He is the worst commentator on the issue going today. Rather than bash an industry which generates an average profit margin of around eight percent, which is hardly earth-shaking. Oil companies make a lot less profit than do brewers, magazine publishers, computer makers, railroads and the semiconductor industry. But nobody’s hammering those people for their prices.

You want lower gasoline prices? Fine. Do something about the cost of extracting and refining gasoline, because that’s the vast majority of the price at the pump. Or cut gasoline taxes. Which isn’t going to happen.

Or do what’s most necessary – namely, ramp up our domestic production of oil and build things like the Keystone XL pipeline which facilitate the easy transport of oil from friendly countries who won’t use it as a weapon against us.

O’Reilly seems to disregard these obvious solutions. He takes the befuddling position that it doesn’t matter whether we produce more oil domestically or facilitate its transport to our refineries, because the evil oil companies will just sell gasoline to China instead of America.

As though an increased supply won’t decrease prices.

It’s economic illiteracy, or at least the presentation thereof. It’s entirely possible O’Reilly is just demagoguing the issue for ratings. Which would be worst of all.

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