The Oil Follies
Daily Article by William L. Anderson
A recent poll taken by CNN found that US drivers fear the possibilities of shortages more than they fear higher prices:
A CNN/Opinion Research poll released Tuesday shows that 55% of those surveyed are more worried about long lines at gas stations and rationing than about the high prices that drivers have paid in recent months. The poll shows 40% of the respondents are more concerned about the high prices.
While gas rationing is not expected at this time, it was a hallmark of the 1970s-era energy crisis, when drivers lined up outside gas stations and sales of gas were limited to certain days of the week.
However, at that time, gas was in short supply, which is not the case today.
Meanwhile, Congress has been stopped in an attempt to create the very thing that motorists fear most. Among the things that were in the bill that has been successfully filibustered by the Republicans:
The windfall profits bill would have imposed a 25 percent tax on profits over what would be determined "reasonable" when compared to profits several years ago. The oil companies could have avoided the tax if they invested the money in alternative energy projects or refinery expansion. It also would have rescinded oil company tax breaks - worth $17 billion over the next 10 years - with the revenue to be used for tax incentives to producers of wind, solar and other alternative energy sources as well as for energy conservation.
The legislation also would:
Require traders to put up more collateral in the energy futures markets and open the way for federal regulation of traders who are based in the United States but use foreign trading platforms. The measures are designed to reduce market speculation.
Make oil and gas price gouging a federal crime, with stiff penalties of up to $5 million during a presidentially declared energy emergency.
Authorize the Justice Department to bring charges of price fixing against countries that belong to the OPEC oil cartel
Anyone familiar with modern politics knows that Republicans and Democrats regularly vie with each other to see who can be more economically illiterate, but it seems that with this proposed legislation, Democrats are determined to take the lead and cripple the US oil industry permanently. It is a shame that for all the years Republicans controlled both houses of Congress and the White House they could not come up with any decent energy-based legislation, but at least we can now be thankful for small favors that Republicans seem to have "discovered" the evils of federal regulation of oil markets.
Instead of looking at this situation squarely and putting together the obvious pieces, it seems that the political classes in this country have decided that supply and demand really don't matter at all, and that all commodity prices are simply arbitrarily administered by people who are impervious to the desires of consumers. Such a view permits the political classes to ride in as heroes. However, in this story, instead of saving the town from the bad guys, the "heroes" burn it down and then claim to be liberators.
In examining the latest follies from Washington, let me emphasize again that it is not Republican versus Democrat, although that might be the assumption from the latest oil votes. If the Republicans really believed that free markets were the best way to produce and sell oil and gasoline, then they would have pushed - and passed - legislation that would have made it easier for energy firms to produce. They did not, and one wonders if the whole episode of the successful filibuster was just one more cynical political ploy that both parties do as a matter of course.
That being said, I still wish to fully examine the filibustered legislation to demonstrate just how destructive it would have been had it become law. Thus, I look at each of the particulars and explain why they were so bad.
The "Windfall Profits" Tax
It is hard to believe that