Senator Bill Frist (R-TN) wants to give me $100 for my troubles at the gas pump and I’m insulted. This is a blatant attempt to buy my vote with money out of my pocket, a ridiculous conundrum.
What would giving $100 to each driver mean? It would mean that “the government” would be buying us two or three tanks of gasoline, along with an implicit vote for the geniuses who back this payoff. It won’t solve any energy problems. It is merely pandering, and it could easily backfire. Intelligent voters will not sell their votes for $100 of their own money (or their grandchildren’s).
Many Democrats favor dropping the federal gasoline tax of 38.4 cents per gallon, at least for the summer. This is not a solution, either. It is yet another election year ploy to buy votes, coming from a different angle. Reducing the overall price of a gallon of gasoline will encourage increased consumption, which is the opposite of what good sense dictates we need.
Another of the opposition party’s answers is to penalize oil companies. “Big oil” is their perpetual villain. Ho hum. Representative Nancy Pelosi (D-CA) calls them “the new era of robber barons.” Some congressional idiots are proposing windfall profits taxes, a la Jimmy Carter. Really worked back then, didn’t it? Furthermore, the oil companies are not to blame for the current prices and to punish them is counterproductive.
Pricing is basically determined by the international commodities markets, which are governed by the classical economic laws of supply and demand. Worldwide demand for oil is steadily increasing, owing largely to the burgeoning economies of China and India. In the meanwhile, supply issues such as Middle East instability, hurricanes in the Gulf of Mexico, and threats by Latin American dictators put a further squeeze on open market prices via the uncertainty they bring. OPEC, which at one point would agree to hold prices low, is no longer doing so.
Of course, the Republicans have to jump on the bandwagon to some extent, because it is the populist thing to do. So, $100 payoffs aside, Representative Dennis Hastert (R-IL) wants to investigate the commodities market to see if someone is artificially manipulating prices. Yeah, sure, Denny. When in doubt, have congress investigate or pass legislation to impose further regulation on the oil industry. A lot of good that will do.
Oil companies have a right to their profits. They earn them the hard way. How easy is it to take a barrel of crude oil from somewhere in the world, crack it, refine it, and convey it to your neighborhood gas pump? Could we do it without them? Hell, no. Our congressional panderers have already put enough obstacles in their path—no drilling in ANWR, no drilling off the Florida coast, along with environmental regulation that discourages building refineries. Despite all the obstacles, gasoline flows freely at the pumps, and oil companies are responsible for that, not the government. If the “fat cats” make a profit—which is not out of line with those of other, less picked on industries—so what?
Oil company profits, by the way, wind up in a couple of places. One of them is your pocket. Yes, that’s right. You who are reading this are probably “fat cats.” You might have a 401(k) or a company pension plan, or perhaps you own mutual funds or stocks. In any of those cases, chances are that you shared in the profits of the oil companies via dividends. You, my friend, are a fat cat oil company owner, one of the new era of robber barons. A minority owner, to be sure, but still an owner. Another place profits go is retained earnings, which supply capital for research and development. This is essential for future energy solutions. The oil companies are the only entities with the necessary resources to conduct research to ensure our energy independence—and they have the incentive to do so. “Government” cannot do anything by itself. With the increasing worldwide squeeze on oil, energy companies will need to seek revenues from other sources or they will succumb to market competition. That is how the free market works.
Nobody is proposing conservation measures that would moderate consumption, and thus ease demand. Are Americans willing to bite the bullet and cut back on consumption? Hell, no. Politicians pandering to them won’t change their profligate mindset, either. Give us our gas guzzling SUVs and Soccermommobiles, but keep our gas prices down—that’s our national mindset. My feeling is that gas prices will be high enough when people start cutting back on demand and insisting that auto makers produce more energy efficient vehicles. Until then, let the prices rise.
I’ve heard arguments that we’re just catching up with the wonderful Europeans. That should make us happy? Perhaps it gives our sorry collection guilt ridden apologists something else to hang their hat on, but it doesn’t cut the mustard with this Turkey. If they don’t like the way we do things here, they can damn well move to Europe. It is true that in Europe the taxes alone on gas at the neighborhood pump have been close to $4 per gallon for years. Again, so what? Who cares what they do in Europe? Let the Eurocentric socialists advance their arguments that Europe is the ideal model for everything. Such arguments are specious at best, and they deserve only passing scorn here.
However, those European prices do suggest that we’re getting a great deal—still—on a gallon of gas in this country. In fact, in inflation adjusted terms, we are still paying less for a gallon of gasoline than we were in 1980. And we are using a lot more now. With global petroleum supplies not keeping pace with demand, it is expected that prices will rise. Regardless of what happens in Europe, we’ve been spoiled for a long time.
Let the free market decide prices. Handing us $100 will neither decrease demand, nor will it increase supply. It is simply worthless. And, as I mentioned before, it is coming out of my pocket.
Aside from the gas pump, petroleum provides components of just about everything that impacts your life: electric power, plastics, pharmaceuticals, synthetic fibers for clothing, paints and varnishes, and cleaning products, to name a few. We have an insatiable demand for all of those items in addition to our addiction to gasoline as fuel for our SUVs. So, even if we find alternative sources of fuel, we’ll still need petroleum. Prices will increase for all the items mentioned here—until we get the supply/demand curves back in balance.
The oil situation is indeed a national security issue. Cut us off from petroleum and we’re weakened. We must not allow that to occur, yet we incessantly debate drilling in ANWR because of a caribou herd, and off Florida, because it might spoil the beachfront view of pricey real estate. Our strategic oil reserve, too, is repeatedly threatened by political expediency. Our current president and his immediate predecessor are both guilty of using (or attempting to use) the strategic oil reserve to provide temporary relief from price pressures. I suppose that the hoped for effect will be more votes for the party in power. Congress, of course, is happy to oblige.
I’m tired of our 535 congresspeople acting like we’re all a bunch of idiots. They think that they can negate the fundamantal laws of economics while we dumbly buy their nonsense. Former representative Dick Armey says, “Political rhetoric is the only discourse in America that completely disregards the laws of economics.” He’s right. I guess the panderers in congress think that their re-election hinges on people with no formal economic education, with IQs below 90, and who live from hand to mouth.
How do we go about this alternative energy thing? Decent energy legislation that is not laden with self-serving, “re-elect me” provisions would be a start, if we could ever put together a responsible bi-partisan coalition on energy. Populist, short-term, “feel good” solutions will do nothing to solve the problems of the future. We must make it easier, rather than more difficult, for the oil companies. The last refinery built in the US was in Garyville, Louisiana, and it started up in 1976. Why? Environmental regulations have made the cost of new refineries prohibitive. We complain about having to use foreign oil, while vast untapped reserves of oil exist in Alaska (which the U.S. Geological Survey estimates would increase domestic supply by 50%) and on the outer continental shelf (which by some estimates exceed the amount of oil in Saudi Arabia), which congress is unwilling to release. We want to find new sources of energy, but environmental regulation has once again stifled a cheap, efficient source of energy: nuclear power. No nuclear power plant has been ordered and built in the United States since 1973, and many have been decommissioned. If congress and the administration in power ignore these regulatory boondoggles, we’ll continued to be mired in energy uncertainty.
Solutions to our energy problems will require cooperative efforts by the public and private sectors—and by us, as individuals. Government needs to work with industry, instead of taking the populist shortcut of declaring industry the pariah. We, as individuals, must do our share to not only conserve energy, but also demand that government and industry do more to work together on increasing energy efficiency, increasing energy independence, and developing new sources of energy. A massive national effort, backed by both parties and the administration might be too much to hope for, especially in an election year, but I can dream, can’t I?
For further reading on this subject, read this April 29 editorial in The Wall Street Journal. I would like to also point you toward a May 3 op-ed by Thomas L. Friedman in The New York Times, if you have premium access to their web site—The Redhead sent me the editorial, with which I amazingly agree, but I can’t post a link to it here because of The Times’ access restriction.