The senators are new to their jobs, and their bone-headed energy bill won’t go far. But mischief isn’t harmless just because it comes from inexperience.
“It is long overdue for the United State Congress to summon up the courage to stand up to the oil industry, one of the most powerful lobbies in Washington, DC, and to say very clearly, ‘Stop ripping off the American people,’” said Sen. Bernie Sanders (I-Vt.) while explaining why he joined seven first-term Democrats supporting a bill for a “windfall profit” tax on oil companies. Another of the senators, Amy Klobuchar of Minnesota, said, “Oil companies have been ripping us off over and over and over again, and this is going to stop.”
The bill’s sponsor, Bob Casey of Pennsylvania, observed: “The Bush administration has let the oil companies run the pump for too long without any real investment in renewable fuels.” Complaining that Pennsylvanian gasoline prices have increased “while oil companies continue to make billions in profits,” Casey said his bill would “increase our energy independence while providing relief at the pump and taking away taxpayer subsidies for big oil.”
What’s overdue
If anything is “overdue,” it’s mature energy discussion free of repeatedly discredited accusations and ideas. Uninformed energy pronouncements, full of invective falsehood, are too common in Washington. They lead to too many mistakes, which are heaping too many unwarranted costs onto Americans.
Casey’s bill, embracing concepts espoused by Sen. Hillary Clinton (D-NY) last year, would do just that (OGJ, June 12, 2006, p. 19). In elegant conflict with its purported aims, the proposal would lower energy independence and elevate oil prices. Its “windfall profit” tax would discourage development of US oil and gas supply. And its closing of “tax loopholes”-in the description of which Casey mistakes deductions for credits-would aggravate the effect. That damage would be minor, though, because the so-called loopholes aren’t the lavish subsidies Casey portrays them to be. In further subversion of the proposal’s stated goals, channeling proceeds of the tax measures to renewable energy and poor people would rush overpriced energy into the market and stimulate consumption.
This riot of contradiction should collapse under serious analysis. But it threatens to evade serious analysis by connecting with the enduring hatred many Americans feel toward oil companies. When junior senators who seem to know nothing about energy speak of oil companies “ripping off” consumers, they and their bad ideas capture attention they don’t deserve. Oil companies therefore need to take accusations like this seriously and address them whenever and from whatever sources they arise.
Americans believe the rip-off myth because they hear it repeatedly. So the response bears repeating: Markets determine oil prices; companies don’t. The market is too big and has too many buyers and sellers, all of them in competition with one another, to allow manipulation by any single company or group. Even the Organization of Petroleum Exporting Countries, with its strong influence over oil supply, can’t manipulate prices to the extent Americans seem to believe. If OPEC, oil companies, or any other source of supply held that kind of market control, oil prices wouldn’t have languished at levels that crimped suppliers’ profits throughout the latter 1980s and 1990s.
Suppliers’ profits
Prices are not now elevated because of sinister manipulation that has somehow come into force. They’re elevated because expanding demand has encountered physical limits to supply. It’s no rip-off that suppliers of a supply-constrained market profit from the inevitably increased prices. Are farmers ripping off anyone by profiting from corn prices newly elevated by ethanol mandates? Where were Sanders, Klobuchar, and Casey’s other partners in demagogy when oil prices were abysmal and oil companies had to shed work and workers to make any money at all?
There is an energy rip-off in the US. It takes the form of wasteful energy initiatives undertaken in pursuit of chimeras such as energy independence and price relief engineered by governments. And it will continue until politicians begin seriously discussing energy and quit exploiting popular misunderstanding for political gain.
