Now we have Republican Bill Frist siding with quasi-socialist Hillary Clinton in a demonization of the oil companies for record profits.
Oct 27, 2005 ̢?? WASHINGTON (Reuters) РAmid record-high earnings from oil companies, Senate Majority Leader Bill Frist on Thursday ordered a Senate hearing with testimony from major oil company executives on why energy prices are high.
The unexpected announcement by the chamber’s top Republican showed the growing political pressure as American consumers brace for higher winter heating costs at the same time energy companies are reporting fat profits.
This is just great. Finally an issue Republicans and Democrats can agree on, excessive taxation of profitable companies. Are you kidding me? This is far more depressing than the price of gas.
And what about that high price of gas? Michelle Malkin points us to this,
In fact, oil cost about 50% more per barrel in 1979-80 than now when adjusted for inflation.
It is also ironic that the very people who have helped create the current energy crunch are now looking at companies profiting from their failed policies for a handout.
It is the liberals who have been against exploration and production in this country for thirty years. They have passed laws and made it virtually impossible for energy companies to invest in E&P. They say no to new refineries (last one built in 1976) to nuclear power (20+years), to more drilling in the lower 48 states, in the Gulf and in Alaska, to onshore liquid natural gas facilities and oceanic wind farms within view of their summer retreats.
Republicans should be making these points, not linking arms with them in an effort to demonize the industry for profiting from their mistakes.
What has been the result of these failed policies?
Since 1981, petroleum industry employment has declined, as the numbers of oil and gas wells drilled, operating refineries, and wholesale jobbers have declined.
The dramatic spike in gas prices this past quarter was a direct result not of a lack of oil, but of a lack of refining capacity. Oil comes out of the ground as a thick sludge. It has to go through a costly and time consuming process before it becomes the gas that we put in our cars. That is called refining. When we have no capacity to refine oil, we end up with shortages of gas at the pumps and that is what happened post-Katrina.
So now the Pander Police on Capitol Hill are gunning for the oil companies for making profits off of their three decade record of anti-energy, anti-exploration and production policies. Makes perfect sense, no?
What would such a tax accomplish? In this case, we have a history to go on. In 1980, President Carter signed into law the Crude Oil Windfall Profit Tax Act, enacted in concert with the gradual dismantling of domestic oil price controls that were in effect throughout the 1970s. The law, which was repealed in the late 1980s, established excise taxes as high as 70 percent on the difference between the selling price and a price set by law.
Economic theory suggests that such a measure would discourage exploration. Drilling for oil is very risky, and investors will take that risk only if they believe there is some chance they will make great profits. Take away the profits, and drilling will stop. It doesn’t matter that the tax doesn’t, as in the Dorgan bill, apply to new wells. Are oil companies really to believe that similar laws won’t be passed again?
In 1990, the U.S. Congressional Research Service studied the effects of the 1980s tax, and found that it had exactly the predicted effect. U.S. production was reduced, and reliance on foreign oil increased sharply. Reinstating the tax would, Congress’s research agency concluded, “make the U.S. more dependent upon foreign oil.”
Where were they when the oil industry lost more jobs between 1986 and 1992 than the steel or auto industries? Where were the press conferences then?
As economist Kevin Hasset of the American Enterprise Institute said this week,
After all that the people in the hurricane areas have experienced in the past few weeks, it’s almost sadistic to threaten them with the re-imposition of a tax that did so much harm to their economy in the 1980s. If Congress wants to do something about high prices, they need to consider measures that will increase supply, not reduce it.
Sadistic but predictable. Predictable that liberals would be looking for a handout from a successful company (Hello Microsoft!). What is pathetic is how quickly the GOP has joined in this effort.
Did these politicians reach a hand out to the industry when it was down?
Many shareholders and industry executives have a far different perspective on current oil, natural gas and gasoline costs than do their consumers. They remember how the oil price surge of the late 1970s, amid turmoil in the Middle East, went bust in the early 1980s.
What followed were nearly 20 years of mostly depressed prices, which also depressed the industry’s earnings and stock prices.
San Ramon, Calif.-based Chevron, for example, earned no more in 1998 than it had in 1985.
Coca-Cola, by contrast, earned nearly five times as much in 1998 as it had 14 years earlier.
Wow! Coca-Cola must be stopped! They are making obscene profits by addicting our children to sugar! Where is the FTC, the FBI? What time is the press conference calling for an anti-trust investigation? See what a joke this is.
This is short-term thinking, political pandering and bad policy all wrapped into one.
UPDATE: Who has obscene profits from high oil prices?
Gas Taxes Exceed Oil Companies’ Profits
“Since 1977, governments collected more than $1.34 trillion, after adjusting for inflation, in gasoline tax revenuesâ??more than twice the amount of domestic profits earned by major U.S. oil companies during the same period.”
Hat Tip: TaxProf via Instapundit