OrbStandard

Like World War II, the President Should Limit Oil Profits
By Gene C. Gerard
September 28, 2005

As gasoline prices continue to rise, Americans are looking to the president to do something that will lower them. What President Bush should do is simply limit oil profits and lower the cost of gasoline. There's clear precedent for Mr. Bush to do so.

During World War II, President Roosevelt successfully decreased corporate profits and consumer prices. Mr. Bush frequently compares the war in Iraq to World War II. Last month, at a ceremony commemorating the 60 th anniversary of the Second World War, Mr. Bush 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.”

Since last year 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 gasoline prices by an average of 45 cents. In Georgia, gasoline prices at some stations exceeded $6.00 per gallon. In the wake of Hurricane Rita, gas has gone up by 30 cents in Texas.

The price of gasoline and many other items also soared in World War II. Corporate profits more than doubled between 1939 and 1943. As a result, in 1941 President Roosevelt created the Office of Price Administration (OPA). The OPA was given the authority to determine the price of a product that it determined to be “generally fair and equitable.”

Congress gave credence 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 over 71,000 retailers were forced to pay $5.1 million for violating price limits.

Recent polls have shown that Americans consider gasoline prices to be one of the most pressing issues that Mr. Bush must address. However, the only actions taken so far by the president have been to release a tiny portion of the national oil reserves, and to encourage people to drive less. During the Second World War 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.

Today, oil companies would almost certainly complain that governmental 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, “There is no principle of law or provision of the Constitution which precludes Congress from making criminal the violation of an administration regulation.”

Oil companies have made huge profits in recent years. Exxon Mobil has seen a 32 percent increase in its profits since 2004. Likewise, ConocoPhillips enjoyed a 56 percent increase in profits since last year. Not surprisingly, 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. According to economic historian Harold Vatter, one of the “…outstanding economic performance achievements by the United States in World War II… was holding down prices, mainly by general government controls.”

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. He has both historical and legal precedents to support this. However, it's doubtful that he will. Given his close ties to the business community, and especially the oil industry, it seems likely that he won't do much to stop rising gasoline prices.

______________________________

Gene C. Gerard taught American history at a small college in suburban Dallas, and is a contributing author to the forthcoming book “Americans at War,” to be published by Greenwood Press. His previous articles have appeared in Political Affairs Magazine, Dissident Voice, The Free Press, OrbStandard, Intervention Magazine, The Modern Tribune, and The Palestine Chronicle

More of Gene's Articles can be Viewed here.