Almost on cue with the latest round of energy company earnings announcements, our political leaders in Washington — both Democrats and Republicans — signaled their intent to attempt to demonize the energy industry for political gain and, in so doing, make it more difficult for markets to respond to the current limited supplies of oil, natural gas, and refined products.
This really is utterly amazing. Sen. Bill Frist (R., Tenn.), the Senate majority leader, asked the chairmen of three Senate committees to investigate high energy prices and declared that he might support a federal anti-price gouging law.
Meanwhile, Energy Secretary Samuel W. Bodman advised a Senate committee that the Bush administration is considering taking steps to create a stockpile of refined products like gasoline, diesel and jet fuel that would require the industry to set aside stocks of a variety of fuels that could be tapped in future crises. In other words, Secretary Bodman is showing government’s usual tendency to make matters worse and more expensive by buying limited supplies of oil products at their currently high price. And this policy is supposed to be a stabilizing force in the energy market?
Mr. Bodman did recommend that the energy industry increase its spending on refining to ease the capacity crunch that has contributed to the recent increase in prices for refined products. However, at almost the same time, Senate Democrats on the Senate Environment and Public Works Committee engineered a deadlock on that committee over a Republican proposal to streamline federal and state permit procedures for companies that want to build refineries or expand plants.
Finally, despite the cyclical nature of the energy business and the need for reinvestment of energy company profits into drilling and exploration for new supplies of energy, politicians are already talking about instituting a windfall profits tax on the industry to make such investment even more expensive and difficult.
Hopefully, our pocketbooks can survive all this nonsense.
Yeah, it’s a great idea to take the profit motive out of play for oil companies, since we all know they lay out huge expenses to explore and drill for oil just for the fun of it. Also, if oil companies have a bad quarter, is the government going to give them money now? Totally disingenous with this coming from Congress, since the gov’t has absolutely cleaned up on gas taxes over the years.
And we all thought the Democrats were dumber. Jeez.
Perhaps Mr. Frist should begin his price-gouging witch hunt by investigating the price of government versus its value to the taxpayers. I suppose the morons in DC will never learn that they are not going to be able to provide the answers to rational market price signals.
I recall that, during the double-digit inflation era of the 1970’s, President Ford announced a government program called “Whip Inflation Now”. To which the late-and-great Bob Hope quipped, “Great – the price of whips just went up 30%”.
Looks like we have a lot of upper class posters here. The oil companies are getting away with price gouging left and right. Their current oligopoly has allowed them to limit production capacity as to increase profits for all of them. And you expect them to increase capacity when their greatest profits occur when they limited production?
The oil companies have once again become corrupt maligners of the public trust, and while people who have a different BMW for each day of the week might be fine in engaging in pedantic debates about supply and demand curves, if you just look at corporate behavior from a common sense standpoint you will see that oligopolies will abuse their power to increase profit.
Taxes on oil companies have gone down during the Bush administration, and what do we get? The highest prices since the 70s. These companies have no incentive to increase production, their profits are better now with lower output. Without a true free market, the government needs to step in and bring back oil company taxes to pre-Bush levels, but structure those taxes to encourage finding new deposits of oil and expanding refining capacity.
When there is no free competition, the government should step in to help the common man. In fact, a famous Republican was known for doing just that (except by busting up conglomerates, which is fine by me as well, taxes seem less severe though). Speak softly and carry a big stick. Well, its time the oil companies stopped giving us the shaft.
Sam,
Oil is fungible. It is the most transparent market on the planet. You can claim oligarchy, but the major internationals make up a minority of oil production on the planet. National oil companies (Petrobras, PDVSA, ARAMCO, etc). make up the majority. If the majors tried to withold production to boost prices, imports would increase and the majors would lose market share.
Highest oil prices? Yep. A couple of hurricanes had something to do with that. A viloent protest in Ecuador had something to do with that. Continued violence in Nigeria had something to do with that. A strike in France had something to do with that. THe prices you see are the result of the free market assigning risk to the price of oil.