Gas Prices Too Low?by
Vin Suprynowicz The Interior Department signed binding leases with some of America’s largest oil companies back in 1998-99, "allowing" the firms to drill in deep waters of the Gulf of Mexico, far outside any internationally recognized 6- or 12-mile territorial limit. The government doesn’t spend any money facilitating that expensive deep drilling, mind you. It doesn’t "subsidize" those operations in any traditional use of the term. Rather, Washington charges the oil companies for the "privilege" of keeping our homes heated and our cars on the road – and then sharply restricts where, in international waters, the drilling can occur. If the oil companies tried to get away with paying less than called for in the leases, what do you think would happen? Instead, the oil companies are perfectly happy to pay the amounts agreed upon. But Democrats in Congress say the leases are "flawed" – the Interior Department wrote them incorrectly and now the oil companies aren’t required to pay enough. Speaker of the House Nancy Pelosi even refers to the difference between what the written leases call for the oil companies to pay, and the amount she’d like them to pay, a "government subsidy." Imagine that. If you’ve been paying three dollars a dozen for eggs, but the supermarket manager now wishes he’d charged you 10 dollars a dozen, then the supermarket has been "subsidizing" you by seven dollars a week ... and has a right to try and get it back! This would be merely silly, if the new-majority Democrats hadn’t now declared their plans to "end those subsidies." House Democrats in the first weeks of the new Congress plan to establish a dedicated fund to promote "renewable energy and conservation, using money from oil companies," The Associated Press reported this week. "That’s only one legislative hit the oil industry is expected to take next year as a Congress run by Democrats is likely to show little sympathy to the cash-rich, high-profile business," The AP adds. Ah, the "new" Democratic party. Not an enemy of capital and commerce among them. What next? A dedicated fund to promote the consumption of alfalfa sprouts, "using money from the big beef processors"? A dedicated fund to promote the wearing of sandals, "using money from the big boot manufacturers"? Whoops: Better not give them ideas. To this gang, selectively looting "greedy, rich corporations" comes as naturally as syphilitic German dictators blaming everything on "the Jews." Details of a renewable fuels fund have yet to be worked out. (Who needs details? It’s feeling good about our intentions that counts.) But aides to Speaker-elect Nancy Pelosi say at least some of the money from the planned tax hikes on the oil companies will go to a program to support research into making ethanol from sources other than corn. The goal, apparently, is to require large oil companies to make available fuel that is 85 percent ethanol, so-called E-85, at some of their retail outlets. Of course, if it were really possible to show net savings by powering vehicles with this stuff, government could just stand aside and let the market work – say, removing all import restrictions on cheap ethanol from Brazil – couldn’t it? In fact, the ethanol boondoggle will remain a huge handout to corn producers like Archer-Daniels-Midland – the real goal here being to make Americans crave $4-a-gallon ethanol by forcing Big Oil to increase gasoline prices at the pump. "What we’ll do is roll back the subsidies to Big Oil and use the resources to invest in a reserve for research in alternative energy," Pelosi, a California Democrat, recently told reporters. Are these guys good, or what? Raising taxes is "rolling back tax breaks." Squeezing more leasing fees than called for in formal, written contracts is "rolling back the subsidies to Big Oil." What specific "tax break" are they talking about? With the goal of promoting American manufacturing, Congress recently reduced the corporate tax rate on profits from products made in the United States. Although the oil companies didn’t ask for the break and say they don’t need it, it applies to them, as well. So now it’s a "tax break" when you pay the same tax rate as everyone else! "Democrats also are targeting other benefits for refinery investments and for expenditures for certain types of oil and gas exploration," The AP reports. Thank heavens. The last thing we want is for oil companies to discover new oil deposits and build more refineries. Such scurrilous endeavors should be taxed to the hilt to prevent a glut of low-priced gasoline and heating oil at any time in the foreseeable future. The Democrats also want to raise taxes on oil INVENTORIES, believe it or not – a move which would cause companies to reduce the amount of oil they keep in storage, according to Red Cavaney, president of the American Petroleum Institute, the industry trade group. If that happens "prices will go through the roof" if there’s even a modest disruption, Mr. Cavaney predicted. The good news? "Both Republican and Democratic lawmakers say there is unlikely to be an attempt to push more sweeping measures such a new tax on the oil industry’s windfall profits," The AP reports, although "Members of both parties have said they also want to make another stab at passing a federal law against oil company price gouging ..." If all of this sounds a bit familiar, it’s because less than two months ago voters in Rep. Pelosi’s own goofily green state of California voted in "the most expensive referendum in history," the campaign over Prop. 87, which aimed to raise and spend $4 billion on alternative-fuel programs, with the goal of cutting Californians’ use of gasoline and diesel 25 percent by 2017. The California measure would also have prohibited oil companies from simply raising prices at the pump to cover their costs of the new tax. Even the Los Angeles Times, which "tends to lean left in its editorials" (I quote Reuters, the international news agency), called Prop 87 "nutty" and said that research into alternative energy sources was already booming in the state – driven by the market, not government. Proposition 87 was defeated, 55 percent to 45 percent, despite support from such notable energy experts as Bill Clinton, Al Gore, Julia Roberts and Brad Pitt. It was too wacky for the roadshow audience in California ... so now they’ll try it in Washington.
January 4, 2007 Vin Suprynowicz [send him mail] is assistant editorial page editor of the daily Las Vegas Review-Journal and author of The Black Arrow. Copyright © 2007 Vin Suprynowicz |
