A turn in the gasoline market has educed chronic U.S. idiocy.
President Bill Clinton and his Republican challenger in November's elections, Kansas Sen. Bob Dole, are dueling with proposals for relief for fuel consumers. Clinton has added gasoline price effects to his rationale for tapping the Strategic Petroleum Reserve for $227 million and asked the Department of Energy to explain recent market behavior. Dole countered with a proposal to repeal the 1993 increase in the federal gasoline tax.
Neither measure promises anywhere near the price relief that the market itself will provide given time. And they're not really relief measures. Clinton wants to sell SPR crude mainly for budgetary reasons. And Dole's tax repeal is a good idea because the tax was a bad idea, which would be the case regardless of gasoline price levels.
Taxes and mandates
In Congress, meanwhile, brokers of outrage have plunged toward utter mindlessness. Rep. Edward Markey (D-Mass.) wants to impose a windfall profit tax on oil companies if the gasoline levy is cut. Connecticut lawmakers demand an antitrust investigation, expressing dismay that gasoline prices have risen at the same time oil companies are reporting strong profits. And there is talk about setting minimum levels for oil company inventories.
Amazing. How, after a long and cold winter, anyone can wonder why oil prices have risen strains the imagination. But it's an election year, and crazy things happen.
Reasons for prices to have risen are available to anyone willing to see. The industry should not hesitate to answer the doubters by adapting a well-worn political phrase: It's the market, stupid. That applies even to modern inventory management, about which industry detractors seem so suddenly concerned.
Of course, ludicrous political responses to rising gasoline prices are as inevitable as market swings. Politicians who refuse to learn from history are doomed to eternal ignorance.
Outrage over profits, however, is especially troubling. Why should any company in the 1990s come under suspicion for making money in a period of market strength? Oil is hardly the only commodity for which prices have risen lately. And oil companies aren't alone in reporting profits.
So why must they submit to an antitrust investigation destined to lead nowhere? Why must they waste time and money fighting government market intrusions of the type that have always hurt most the very consumer interests they pretended to serve?
Haven't the retreat of communism and ascent of developing countries willing to discard central planning taught U.S. politicians anything?
Profits are good. Profits make economies grow. Profits create jobs. Profits improve lives.
And oil company profits are as good as any other kind.
The antiprofit oil politicking revived by the recent gasoline price increase has no place in enlightened governance. It is, in fact, contrary to U.S. interests. Oil companies should not hesitate to say so.
Markets work. Governments should leave them alone.
A voice for restraint
In the current fray, one U.S. official deserves industry notice for acting with apparent clear-headedness. Even with her boss demanding an explanation of the self-evident, Energy Sec. Hazel O'Leary last week was urging government restraint. Earlier, her department had openly resisted plans in the Clinton administration budget for sale of SPR crude.
Asked about Markey's request that she consider a windfall profit tax, O'Leary, according to the Wall Street Journal, responded, "I haven't even begun to sniff at it." And to proposals from lawmakers of her own party for inventory controls on oil companies, she said she hesitates to "mandate behavior" of the oil industry.
"We already know that didn't work well in the '70s and '80s," the paper quoted her as saying, "and I was there."
Someone in government learned something from history. The industry should hope O'Leary isn't alone. Copyright 1996 Oil & Gas Journal. All Rights Reserved.
