Well, in the face of constantly-rising gas prices in the United States (good lord! They're almost up to the levels Europe pays!), Congress has valiantly swung into action to the defense of the American consumer and done... well, nothing.
With great fanfare and much bloviating and boasting, Congress passed -- by huge, veto-proof margins -- a measure suspending additions to the Strategic Petroleum Reserve, a stockpile of about 700 million barrels of oil. Currently, the government buys about 70,000 barrels a day and sells about the same, keeping the stock "fresh." (Why a product that's been sitting in the ground for millions of years has an apparent "shelf life" is something I don't quite understand, but that's what they do.)
For comparison, the United States uses about 21 million barrels of oil a day. That means that the Reserve has enough oil to keep the United States going for 33 days -- presuming we change nothing about our way of life AND we use nothing but the Reserve, two extremely unlikely events. A bit more relevant number is 0.33 percent -- that's how much more oil that is available for consumers with the cessation of the Strategic Petroleum Reserve suspending its stock-rotation plan.
If that was all that Congress was planning on doing, I wouldn't be too upset. This move is pretty much nothing, and "doing nothing" is usually the wisest move for the government to make when it comes to messing around with the economy. But it's an election year, and since we can't feed Christians to lions any more (throwing them to the ACLU often leads to similar results, but is less entertaining) , the mob's blood lust must be sated somehow.
So the Democrats are going after Big Oil.
Maybe I'm just too simple, but I just can't wrap my head around the logic here. Someone please tell me where I'm wrong:
1) The biggest component right now in the skyrocketing price of gas is the skyrocketing price of crude oil.
2) The people who set the price of the oil -- the oil producing countries, mainly represented by the Organization of Petroleum Exporting Countries (OPEC) -- are the ones who are making out like bandits in this whole mess.
3) Big Oil doesn't sell crude oil, it buys it and refines it into useful stuff. This means that a rise in crude oil prices doesn't directly translate into money in their pockets.
4) Big Oil's record profits are almost entirely based on their having consolidated. While the numbers of their profits have gone up, their profitability -- as measured by their profits as a percentage of their total income -- has pretty much stayed the same. In fact, their rate of return is actually considered pretty mundane for big companies.
So, the Democrats' proposed solution to this? Shoot the messenger! Beat the crap out of the middleman!
I exaggerate, but only slightly. Here's how the Boston Globe chooses to describe their plan:
A Democratic proposal to impose a windfall profits tax on oil companies, roll back tax breaks for the industry, and provide new protections against price-gouging is expected to face a GOP-led filibuster when it reaches the Senate floor as early as next week.
It's simple. The Democrats know they can't bully and threaten the oil-producing countries, who are the ones making the big bucks right now, but they can hassle the oil companies. It's a variant of the old song: "If you can't be with the one you love, love the one you're with." Or, in this case, if you can't beat up the guy who's causing you problems, beat up someone who's within reach.
Let's look at these proposals:
1) Impose a windfall profits tax on oil companies.
As I noted, there are two ways of measuring profits: actual dollars, or percentage of total income. If Congress decides to put a cap on the actual dollars the oil companies can claim as profit, then watch the tax lawyers have multiple orgasms all over the place as they do everything they can think of to cut back that profits. bonuses for employees and executives, buying new equipment and companies, and all sorts of dodges that haven't even been invented yet. I'll go out on a limb and say that after the first year, it will be almost miraculous if a single oil company pays a dime in "windfall profits."
2) Roll back tax breaks for the industry.
Tax breaks are the traditional "carrot" part of government influence on economic policy. These tax breaks are, for the most part, intended to encourage companies to do things that don't, on their own, make economic sense. In short, they're the government saying "we want you to do certain things you wouldn't do on your own, so we'll pay you to do it." As I understand it, this involves things like researching alternate forms of energy, finding new sources of oil, and improving energy efficiency.
In other words, the kinds of things that reduce our oil consumption and cut the costs of maintaining our way of life.
So, why not get rid of them, just when we need those sorts of things the most?
3) Provide new protections against price-gouging.
This should be most entertaining. Consumers most directly feel the pinch at the gas pump, so it's usually the gas stations that feel their wrath. But as I understand it, they don't like high gas prices, either. They get told what they can charge for gas by their suppliers, and it's usually set as a certain price above what they pay. In other words, they make just as much money off $4.00/gallon gas as they did off $1.00/gallon gas.
But when gas prices get too high, people buy less. That means that higher gas prices mean gas stations make less money.
If there is any real "price-gouging" going on here, it's at the supply point. It's the folks selling the crude oil that are making the big bucks based on the current prices, and Congress can't do squat about them.
Actually, that's not true. There are quite a few things that Congress could do about the suppliers of oil, but that would require something too closely resembling courage, and we can't have that. Things like:
1) Easing restrictions on producing more domestic oil.
2) Cutting back the number of "regional blends" of gasoline required, to make the existing fuel supply more flexible in response to regional crises.
3) Giving Iran a good bitch-slap and telling them to knock it off. Right now, every now and then they stage some sort of military "incident" in the Persian Gulf that makes the oil-producers nervous, and that's always good for a few bucks' hike in the price of a barrel of oil. And since Iran is an oil exporter itself, it's to their benefit to keep tossing out these little scares.
4) INCREASE tax breaks for companies that work on reducing our dependence on foreign oil.
Of course, these are all fairly minor measures. They don't address the real problem here: an increase in the global demand for oil.
China and India, just to name two nations, are experiencing huge jumps in their oil consumption. They are now competing with us to buy oil. And as anyone who knows anything about economics knows (I just barely qualify here), if you have more people wanting something and willing to pay for it, then the price will go up to pretty much "whatever people are willing to pay."
All that, though, is irrelevant. Common sense is always the first victim when Congress gets involved, especially in an election year. At those times, actually fixing problems takes a distant back seat to appearing to do something.
It's the ultimate triumph of style over substance, of what Billy Crystal lampooned with his Fernando, who said "it is more important to look marvelous than to be marvelous."
God help us. Mark Twain said it best: "no man's life, liberty, or property is safe while the legislature is in session."
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