When oil falls but petrol does not, ask who benefits

The Hill reports a striking asymmetry: crude oil has fallen toward its prewar price following a U.S.-Iran memorandum of understanding, yet the price of gasoline at the pump has not followed. President Trump has directed blame at Big Oil, using the word gouging. I am not in a position to verify the specific figures, and I would caution against treating a politician's accusation as settled fact. But the underlying phenomenon — that a fall in input cost is not passed along to the consumer — is one I would have recognized in any century.

In The Wealth of Nations I observed that merchants in the same trade seldom meet together, even for entertainment, without the conversation ending in a conspiracy against the public, or in some contrivance to raise prices. I did not say this to condemn merchants as villains; I said it to explain why the institutional framework around them matters so greatly. Self-interest is not a sin. It is a reliable motive. But reliable motives, left without discipline, produce predictable abuses.

The relevant question here is structural. Refining capacity in the United States has been consolidating for decades — this is inference on my part, not recollection, but it is the kind of inference the logic of mercantile organization invites. When the number of sellers in a market is small enough that each can observe the others' pricing, the invisible hand loses much of its corrective force. Prices can be sticky downward not because any single firm conspires, but simply because no single firm has reason to be the first to cut margin. The consumer bears the cost of that coordination, whether or not a formal agreement exists.

I have always been skeptical of those who invoke my name to argue that markets need no supervision whatsoever. The invisible hand operates within a framework — of contract, of law, of competitive entry. Where entry is blocked, whether by a chartered monopoly such as the East India Company I criticized in my own time, or by the capital requirements and regulatory complexity that today limit new refinery construction, the disciplining force of competition is correspondingly weakened. The remedy is not a price ceiling imposed by executive temper; that merely shifts the distortion. The remedy is honest inquiry into whether the institutional framework that is supposed to discipline exchange is actually doing so.

A sovereign who genuinely cares for his subjects' welfare will ask not merely whether prices are high, but why they are high, and what prevents the normal corrective mechanism from operating. That is a question for regulators, legislators, and ultimately courts — not for accusations alone. The consumer at the pump deserves an answer that goes deeper than a tweet, and an institution capable of delivering it.