ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Wednesday, April 02, 2008

Big Oil & Congress

It seems that the Democrats version of an Energy Policy is to kill the Golden Goose - similar to the pols in Atlas Shrugged who kept restricting the freedom of Dagny Taggart and, as things got worse, continued to tighten their own noose.

From today's WSJ:

REVIEW & OUTLOOK
Oil Refinements
April 2, 2008; Page A14

The latest in the series of pointless gestures that constitute Congressional energy policy came yesterday, when executives from five major oil companies were paraded before Ed Markey's House hearing on global warming. They served as political props for Members to denounce rising gas prices, ventilate Dick Cheney conspiracy theories and otherwise advertise their ignorance of the markets they purportedly oversee.

Democrats, for instance, might rejoice over higher energy costs, which is precisely the eco-policy they've been advocating for years. Until Congress finds a way to abolish the price mechanism, paying more for gasoline is the only signal that will tell Americans to cut their consumption. How exactly do Democrats think a carbon tax or cap-and-trade regime is going to work?

The oil executives performed a public service by pointing out other economic realities. About 70% of the price of gasoline is determined by the global price of crude, which is rising because of world-wide demand and volatility in the commodities markets, not to mention the Federal Reserve's easy-money policy. Congress might also look to its gas mandates and the corset it has laced around domestic production.

It's true that industry profits are at a record high, but oil is a classic boom-and-bust business, which is why billions in capital investments are folded back into exploration and production. Besides, the industry's effective tax rates are in the neighborhood of 40% to 44%. Over the past five years, Exxon Mobil's total U.S. tax bill exceeded its U.S. revenues by some $19 billion.

Mr. Markey also used the occasion to threaten special tax increases, grilling the executives about $18 billion in "subsidies," which are actually a tax deduction that Congress itself extended to all manufacturers, including Big Oil. And he demanded that the companies commit 10% of profits to renewable energy. But as an Exxon vice president put it, fossil fuels are still going to account for at least two-thirds of the world's energy consumption in three decades and whatever scientific progress is made, the practical prospects for alternatives remain "very, very small."

The oil exec also pointed out that progress in renewable energy can't be measured by the amount of money thrown at the problem.

As the oil exec made this statement, Markey was seen wrapping duct tape around his head to keep it from exploding - he'd never heard of such a thing.

Does any other company or industry have to go before Congress to explain their profit margins? What in the hell is going on in this country?

Monterey John had commented previously about how ridiculous the prices in California were... there is no question that the differences between California and Missouri gasoline are not related to the supply & demand economics of the different states, but rather their tax policies.

When will people begin to realize that their government is the primary reason for the high gas prices? From the ridiculous number of formulations to the ridiculous taxes to the weak monetary policy to the restrictions on exploring, extracting, and refining oil?

Who Is John Galt?

Your Co-Conspirator,
ARC: St Wendeler

Comments (1)
Monterey John said...

The profits of the oil companies are undeniably huge.

So what?

What is the return on the investment is the question everyone should be asking.

I am not going to take the time just now to go look at the annual reports of Exxon, Shell et al, but I know the earning are good, not great, but good.

Are oil companies not allowed to make a decent return on their investment?

This sort of crap is so intellectually dishonest that I just want to scream sometimes.

What is it Kinky Friedman said the other night about politics?

"Politics. Poli meaning many. Tics, blood sucking parasites."