Tragic events give the US oil industry a chance to claim principled ground in its relations with customers. It must not miss the opportunity.
The collapse on Aug. 1 of a busy interstate-highway bridge in Minneapolis, the death toll for which had reached nine at this writing, has revived calls for increased taxation of gasoline. A spokesman for the US House Transportation and Infrastructure confirmed that a tax hike is under consideration. President George W. Bush has expressed reluctance to support the idea (OGJ Online, Aug. 10, 2007).
Standard argument
Bridge-maintenance needs thus join the standard argument for a deepened tax bite on gasoline: that it would discourage oil consumption and thereby reduce emissions of air pollutants and greenhouse gases, lower US dependence on foreign oil, preserve a depleting resource for future generations, and keep money away from foreign regimes that support terrorism. Each of those claims has weaknesses. But the industry doesn’t need to address them when gasoline taxes are at issue. All the industry needs to do is oppose new taxation for the simple reason that higher taxes would hurt its customers. That’s all. That’s enough.
For oil consumers, these are not happy times. Growing demand and limited supply have pushed prices of gasoline and other oil products to uncomfortable levels. Inevitably, the government has blundered to the rescue with ill-conceived, politically motivated responses that can only aggravate the stress. Against prices elevated by market forces, consumers need no protection because they hold the ultimate defense: the option to consume less. Against costs imposed by politicians claiming to act on their behalf, consumers aren’t so lucky. Here, they need an advocate. What better advocate can there be for oil and gas consumers than the industry that supplies oil and gas?
Within that industry, however, support always can be found for a gasoline tax hike. The view usually rests on the supposed need to lower consumption. Coming from the oil industry, this position can be made to seem self-sacrificial and therefore especially righteous. Within the industry itself, it can feel like the moral high ground.
Yet the assertion that lower gasoline use merits taxation carries poisonous implications. One of them is that some optimum rate of consumption exists, always below the current level, toward which it is the business of government to steer markets. But what is that optimum consumption level? Politicians and oil companies have no way of knowing and can only guess at the answer. A variation of this implication is that any lower rate of consumption is always better than the present level. In that case, there is no logical limit to the taxation rate.
Demand-based arguments for new federal taxes moreover imply that gasoline use inherently contradicts national interests. The assertion is wrong; when espoused by anyone in the oil industry it’s hypocritical. The national benefits of gasoline use, which relate to unrivaled cost and convenience, far outweigh the disadvantages, mainly the environmental risks. The oil industry should focus its politics on that balance and its strategies on the environmental performance of its products and operations.
Playing defense
Attacked in politics continuously and from many directions, the oil industry always plays defense. Its public message thus tends to ring with negativity: Oil companies do not manipulate prices; their work doesn’t spoil the environment; they don’t have profit margins as wide as everyone thinks. This is no way to earn general political support.
The better, positive approach is to advocate strongly, noisily, and consistently on behalf of oil industry customers-energy consumers-even when they’re angry about the price of gasoline. The way to do that consistently is to assert free markets over government manipulation in all matters related to energy. And the way to do it immediately is to point out the roaring fallacy of popular comparisons of oil price increases with tax hikes. The markets that raise oil prices eventually cycle and lower the harm to consumers. The governments that raise taxes seldom reverse course and more often-as the House is considering now-just return for more.