Byron Dorgan: There’s No Free Market With Oil
Byron Dorgan, writing in the Fargo Forum:
You know, Dorgan's right. OPEC collusion does tend to skew free market prices on petroleum. The problem though is that Dorgan's solution isn't really going to solve anything:
Read the whole thing if you must.
First off, what does the seizing of private enterprise profits for re-distribution to the people sound like to you? To me it sounds like outright socialism, something that has no place in America. Not to mention the fact that this idea would stifle the oil industry's ability to innovate in the face of changing situations in an inelastic market and would kill off the current boom that is taking place in his own state's oil industry.
The term "excess profits" all by itself makes my inner capitalist want to throw up all over the place.
Second, I wonder if it's ever occurred to Senator Dorgan that a better way to fix the problem of our dependence on foreign oil is to allow for the development of domestic petroleum reserves. Recently our Senate voted to allow drilling in the Alaska National Wildlife Refuge, yet Senator Dorgan opposed it.
One wonders why. If Dorgan is really that concerned about gas prices in America then why is he opposing legislation that would put more oil supplies on the market? Anyone with a basic understanding of economics knows that increasing supply brings prices down, is it that Dorgan himself doesn't understand this or is engaging in a bit of willful ignorance?
At the very least he should have been in favor of opening ANWR up for drilling and passing this "excessive profits" tax. At least then he would have been consistent, if still dead wrong about the tax.
(via The North Dakota Democrat Party)
Update:
Say Anything reader, contributor and podcast co-host Tom Brusegaard had a counterpoint to Dorgan's op/ed in the Forum yesterday.
It's definitely worth a read.
In North Dakota we use twice as much gasoline per person as New Yorkers do. Why? Simple. We are a farm state. And we drive longer distances when we travel. We are fifth in the nation in per capita total energy use and rank second in per capita gasoline use.
When the price of oil spikes up and when gasoline, diesel, natural gas and home heating fuel prices increase as a result, it hurts North Dakota residents more than most others in the United States.
That%u2019s why oil prices are of such concern to our state.
On Jan. 1, 2004, the price of a barrel of oil was $34.50. At that price the major, integrated oil companies were earning the largest profits in their history.
These days the price of oil is more than $60 a barrel. The major oil companies (larger now because of blockbuster mergers in recent years) are making the bulk of nearly $7 billion a month in windfall profits above their record profits of last year.
While the big oil companies are busy counting their windfall profits, people filling their cars up with gas are experiencing the pain of inflated gasoline prices.
There%u2019s no free market for oil. OPEC oil ministers sit around a table, colluding about supply and price. The big integrated oil companies (bigger and stronger as a result of mega mergers) face less and less price competition. Finally, the futures market is a grand bazaar of speculators. There%u2019s no free market there %u2013 only an unfair process that gives record profits to the major integrated oil companies and record pain to consumers.
You know, Dorgan's right. OPEC collusion does tend to skew free market prices on petroleum. The problem though is that Dorgan's solution isn't really going to solve anything:
We should enact a windfall profits tax to recapture those excessive profits and use the funds to make rebates to consumers hurting from these prices.
Read the whole thing if you must.
First off, what does the seizing of private enterprise profits for re-distribution to the people sound like to you? To me it sounds like outright socialism, something that has no place in America. Not to mention the fact that this idea would stifle the oil industry's ability to innovate in the face of changing situations in an inelastic market and would kill off the current boom that is taking place in his own state's oil industry.
The term "excess profits" all by itself makes my inner capitalist want to throw up all over the place.
Second, I wonder if it's ever occurred to Senator Dorgan that a better way to fix the problem of our dependence on foreign oil is to allow for the development of domestic petroleum reserves. Recently our Senate voted to allow drilling in the Alaska National Wildlife Refuge, yet Senator Dorgan opposed it.
One wonders why. If Dorgan is really that concerned about gas prices in America then why is he opposing legislation that would put more oil supplies on the market? Anyone with a basic understanding of economics knows that increasing supply brings prices down, is it that Dorgan himself doesn't understand this or is engaging in a bit of willful ignorance?
At the very least he should have been in favor of opening ANWR up for drilling and passing this "excessive profits" tax. At least then he would have been consistent, if still dead wrong about the tax.
(via The North Dakota Democrat Party)
Update:
Say Anything reader, contributor and podcast co-host Tom Brusegaard had a counterpoint to Dorgan's op/ed in the Forum yesterday.
It's definitely worth a read.
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