An institution that can’t learn deserves pity. An institution that won’t learn deserves condemnation. Congress belongs in the latter category.
Last week’s Senate Judiciary Committee hearing on oil and gas antitrust issues showed why government should avoid energy issues. Fuel consumers can’t afford any more mistakes from a legislature that won’t learn.
The prices of petroleum products and natural gas are high for market reasons anyone can see. Yet committee members think they need to do something. They’re investigating whether oil and gas industry mergers have increased energy prices. They would not do this if they had not already decided, quite incorrectly, that mergers made prices rise. And Chairman Arlen Specter (R-Pa.) and Ranking Minority Member Patrick J. Leahy (D-Vt.) plan legislation to penalize oil companies that withhold oil supplies to boost prices.
Craving scapegoats
Witch hunts like this happen because the US, to its peril, remains stuck in a backwater of juvenile suspicion about energy. When prices rise, consumers crave scapegoats for their discomfort. They reject market explanations for price behavior. They see conspiracy in the oil company profit increases that logically accompany price increases. And they learn nothing from general media that can’t see past this simplistic formulation or lawmakers exploiting feelings of victimization.
The suspicion that short-circuits learning would be only annoying if Congress didn’t occasionally act on its misapprehensions. Because it refuses to learn anything about energy, its energy actions are nearly always wrong. So consumers suffer.
Congress has done more to raise prices of energy than all the concentration that has ever occurred in the oil and gas business. It has raised fuel costs with excessive manipulations of gasoline chemistry. It has allowed regulators to impose needlessly strict specifications on diesel fuel. It has left refiners and marketers subject to endless legal liability for making and selling a gasoline additive required by air quality laws. It has refused to approve leasing of the Arctic National Wildlife Refuge Coastal Plain. It has been party to the lock-up of most of the Outer Continental Shelf. It has stifled investment in oil and gas supply with misguided taxes and encouraged consumption in periods of shortage with price controls. And now, because prices have increased, it proposes to worsen the record.
An example of recurrent folly is a provision of the bill Specter and Leahy will propose labeled “No Oil Producing and Exporting Cartels.” NOPEC would expose foreign producers to antitrust lawsuits in the US. So a country that won’t produce all the oil and gas it can would sue foreign producers for decisions it disliked. This first-order hypocrisy is necessary, says Sen. Mike DeWine (R-Ohio), chairman of the committee’s antitrust subcommittee, because actions by OPEC have the biggest effect on retail prices of oil products. Would antitrust behavior by foreign producers include producing at nearly full capacity rates for the past couple of years to keep retail prices from rising in the US even more than they have?
Political circus
DeWine’s babbling on behalf of a ludicrous proposal wasn’t the only evidence that, for economic expertise, the committee didn’t field the A-team. Wisconsin Atty. Gen. Peg Lautenschlager proclaimed, “We know that the upward volatility of natural gas prices can’t be explained by supply and demand.” So what explains the downward volatility of the past several weeks? In Lautenschlager’s world, no one will ever know. “The financial markets are complex and lack almost completely any kind of transparency,” she said. Where only lawyers see problems, after all, only lawyers have solutions. And only in a political circus like this could New York lawyer David Boies have complained with a straight face that Alaskan North Slope producers haven’t yet built a gas pipeline to the Lower 48 because they want to exercise market control.
This hearing won’t increase energy supply, which is what consumers need. Anything that comes of it will discourage investment and stunt supply, giving consumers precisely what they don’t need. Even worse, the theatrics perpetuate a shameful institutional oblivion from which flow energy mistakes that become costlier as US energy challenges grow.✦