What is it about rising gasoline prices that causes IQs and body temperatures to converge? Or are our national politicians just behaving as usual, i.e., cravenly and cowardly?

Democrats favor higher gasoline taxes and higher gasoline prices -- except when gasoline prices are high. While claiming concern about rising levels of CO2, they demand gasoline price caps to “protect consumers.” Don’t they understand that high gas prices provide the best incentive to transition to more environmentally friendly fuels? Democrats who object to higher gas prices simply aren’t serious about dealing with climate change.

Republicans favor letting oil markets “work” -- except when gasoline prices are high. Don’t they understand the cure for higher prices is -- higher prices? Sen. Arlen Specter (R-PA) threatens a “windfall profits” tax on “excessive” oil company profits. “Hey Arlen, been there, done that.”

If he needs a reminder of the sorry history of this policy, here’s one from Nobel Laureate economist Thomas Schelling before the Joint Economic Committee in 1979. He explains the counter-productive incentives this policy creates:

“Any windfall profits tax ... is ... like the IRS treatment of casino gains and losses. The government proposes to capture only the 'excessive profits' of the lucky strikes.... If you gamble ... and win ... the IRS will share your winnings with you, and indeed the bigger you win, the higher the share the IRS takes. If you lose, you lose alone; the IRS neither commiserates nor shares in your loss.... This is a sure way to discourage risky enterprises.... We want people to ... risk capital in the search for new petroleum, and in the development of new technologies for liquid fuel.”

Advocating a windfall profits tax is a transparently absurd act of political pandering. Can the GOP be surprised if principled conservatives remain on the sidelines this November?

The oil business is a notorious boom-and-bust industry. But with BP, ExxonMobil, and Shell reporting record profits, the Tax Foundation reminds us that the biggest beneficiaries of gasoline sales are federal and state governments, not the oil industry. They note, “There have been only three years (1980, 1981, and 1982) in which domestic oil industry profits exceeded government gas tax collections. In the remaining years, gasoline tax collections consistently exceeded oil industry profits, reaching a peak in 1995 when gas tax collections outpaced industry profits by a factor of 7.3.”

It’s not just oil companies that reap extraordinary profits. Microsoft, Google, and Apple do very well. What’s the key to their success? They provide customers with products they want at a price they’re willing to pay. However, innovative entrepreneurship carries great risk. This is true whether one is exploring new fuel technologies or new cancer drugs. Without the prospect of occasionally earning spectacular profits, we’d live a much impoverished life.

It’s obvious that when Hurricane Katrina disrupts production, gas prices rise. Are other increases the result of oil company collusion? There is almost no evidence this actually happens. For example, in the months after Katrina, gas at my favorite Bozeman station declined nearly 35 cents per gallon from the hurricane-induced high.

The Federal Trade Commission reports about 85 percent of the price of gasoline is explained by the cost of crude oil. U.S. oil companies account for only about 3 percent of world crude oil production. How can they possibly manipulate crude oil prices?

An unappreciated aspect of the market process is its ability to promote cooperation and civility among disparate people. Interfering with this process can lead to a breakdown in social order. For example, in 1979 gasoline price controls caused long lines at filling stations. At one in Levittown, Pennsylvania, tempers flared and a riot ensued. Commenting on the violence, the Wall Street Journal published an op-ed, “Buffer of Civility”:

“[A]mong the virtues of the price mechanism [is] that it avoided social strife. It did not set group against group.... In our lifetime ... we have generally allowed prices to allocate goods among different end uses. It worked so smoothly we did not understand [that].... In addition to its economic virtues, the price mechanism is a vital buffer of civility.”