NEW YORK - The all-star cast of energy executives due to face Congress Wednesday has an unenviable task: convincing lawmakers that record profits in the face of sky-high gasoline prices do not warrant penalties.
At issue is whether Congress will levy a tax on record oil industry profits, be it a windfall tax on sales of oil over a certain price or a tax to fund a winter heating program for low-income families.
Most of the fireworks at the hearing are expected to be set off by lawmakers, feeling heat from constituents over gasoline prices and heating bills.
Corporate head honchos, however, are expected to be noncombative.
The oil companies have steadfastly maintained that record profits are nothing to be ashamed of, but brash statements in self-defense may backfire, said one government policy analyst.
“The problem is there is no way for oil companies to look good in this environment,” said Kevin Book, an analyst with Friedman, Billings, Ramsey & Co. Book said criticisms heard on the news are going be repeated through questions like: “’How do you deal with old grandmothers being pulled from their homes because they can’t afford to heat them?”’
The left's desperate scramble to tar-and-feather oil executives over high gas prices is nothing short of astounding. I've been chronicling North Dakota Senator Byron Dorgan's push behind this "windfall profits" legislation (here, here, and here, with ND State Rep. Tom Brusegaard's op/ed on the issue here) and I can't help but feel that Dorgan, and the legislators who are with him on this issue, either don't understand simple economics or are pretending like they don't for some ulterior motives.
First off, what these legislators don't understand about recent high gas prices is that they are high because of a decrease in supply. Hurricanes Katrina and Rita did some major damage to petroleum supply lines in the south. This meant that gasoline became more scarce and prices went up. Anyone with a basic understanding of economics gets this. The oil companies were not jacking up prices to buy themselves new corporate jets, they were doing what is necessary to succeed in an open market.
Second, most of the legislators siding with Dorgan voted against drilling in ANWR. I know for sure that Dorgan himself did. If they're all so concerned about gas prices then why in the world are they opposing the development of more petroleum supplies? Something that will bring down prices? Supply goes up, prices go down. Again, Economics 101.
Third, the gist of the legislation backed by Dorgan is that "excessive profits" from oil companies will be taxed heavily and re-distributed to the people. If they really want to lower price and give citizens back some of their money why don't they lower federal taxes on gasoline? Why institute a new tax when they could effect the same sort of change, more directly, by lowering the nearly $0.50/gallon U.S. citizens already pay on average in gas taxes? A simple $0.04/gallon decrease in taxes could save citizens $6 billion.
I'm not trying to tell you people that there isn't a problem with energy prices in this country, because there is. What I'm telling you is that people like Dorgan are going about solving the problem all wrong. Their solution (more taxes!) won't make prices go down, they'll make them go up. The tax won't be a burden on the oil industry, they'll simply pass the cost of the tax onto citizens.
There are so many better solutions to the energy problem. Like, for instance, easing restrictions on building new refineries. Easing restrictions on domestic oil exploration. Lowering taxes on gas. Any, or better yet, all of these initiatives would lower energy costs, yet people like Dorgan aren't interested in implementing them.
Why?
Here are my theories:
- They are big-government bureaucrats who leap at any chance to levy more taxes and seize more power from the American people.
- They are trying to draw attention away from the real reasons why gas prices are so high: The oil industry is heavily taxed, hopelessly mired in red tape and can't raise production levels because they can't build new refineries or exploit available domestic oil reserves. All of which, for the most part, is the fault of people like Dorgan.
- A combination of 1 and 2.
What Dorgan and his comrades are doing is shameful. It's easy to cast aspersions at big-time oil executives. They're rich, so it's easy to also make them look greedy to the average American with only passing knowledge of the facts that surround this situation. But what's really going on here is a push to levy another tax on the American people and seize more power for the government.
Dorgan's solution isn't a solution at all, unless the problems he is trying to solve is a free oil market and Americans paying too little in taxes.
(via The North Dakota Democrats Blog)