I think the essence of Bowyer’s argument comes down to the following claim:
Gas-price hikes will never, ever, ever cut into consumer spending. It’s a mathematical impossibility. Here’s why: Gas prices are a component of consumer spending. You see, when gas prices climb from $2 a gallon to $3 a gallon, one of the components of retail spending goes up. Gas stations are retail establishments. People make money working at gas stations (which now generally serve as convenience stores). People make money managing the corporations that own these stores. And, of course, people make money by owning shares in these companies. Sure, if people spend more money on gas, they may very well spend less on soft drinks. But that’s a substitution, not a decrease in overall spending. The spending simply shifts from one retail category to another.
Simply put – higher gasoline prices transfer income from U.S. consumers to the owners of the various chains that lead into the price at the pump. If the sole reason that gasoline prices went up was an increase in the distributor margin – then Bowyer does have a point. Mr. Bowyer’s graph of gasoline prices may have come from this source, which also shows the components of gasoline prices among the price of oil, the distributor margin, the refinery margin, and taxes. Over the January 2007 to November 2007 period shown by Mr. Bowyer, gasoline prices rose from $2.24 a gallon to $3.08 a gallon. While the distributor margin component rose from $0.13 a gallon to $0.27 a gallon, the refinery margin component fell from $0.41 a gallon to $0.31 a gallon and taxes fell from $0.46 a gallon to $0.40 a gallon. The oil price component rose from $1.28 a gallon to $2.10 a gallon. If we summed up all non-oil price components – which could reasonably be seen as domestic income components, the non-oil price components contributed only $0.02 of the $0.84 per gallon price increase.
I trust that Mr. Bowyer understands that much of our oil is imported from abroad. If so, why doesn’t he realize that this increase in oil prices represents a transfer of income from the U.S. to the oil exporting nations? It would seem higher oil prices, which drove up the price of gasoline, did lower U.S. income. Had Mr. Bowyer checked the details from his own source, he would have realized that his claim really was incredibly stupid – even for the National Review.