In preparation for my imminent retirement, I've been going through files and files, throwing things out but keeping things too.
I came across a letter I wrote to George Pearson of Koch Industries, who took me to dinner in July 1983 to lobby me on something I didn't need lobbying on: oil import fees were and are a bad idea. (Was it legal for him to buy me a nice dinner? Yes. The law changed effective January 1, 1984.)
Here's my letter in response to a document that George gave me at dinner, followed by his response.
Clarification: When I wrote, "Only if refiners price their products at average cost rather than marginal cost will the low price on domestic crude be translated into low product prices," I meant, and should have said "base their product prices on average cost rather than marginal cost." I didn't believe then, and don't believe now, that the retail gasoline industry is a perfectly competitive one. What I was getting at--and I fear I misled George--is that the refiners look at marginal cost rather than average cost in setting prices.