Finally, after years of waiting, it seems we have an energy plan. The new plan, put forward by the liberals in the Democratic Party is a three part strategy.
First, subpoena the CEOs of the major American oil companies, drag them before investigating committees, and grill them until they confess to collusion in price gouging the American public by making billions of dollars in oil profits at their expense.
Second, pass a windfall profits tax to strip them of those obscene profits, returning the money to its rightful owner, the Federal government, and punish them for the audacity of making a profit in a capitalist society.
And third, put a stop to any and all attempts to drill for further oil anywhere within the United States or her outer continental shelf offshore. And while we are at it, make oil “price gouging” a federal crime punishable by jail time.
This may not bring down the price of gasoline and it won’t result in more energy for the United States; but it sure will make the Democrats feel better. And it will surely punish those greedy oil executives and show them who is boss.
I believe in not just listening to what people say, but watching what they do as an indicator of what they truly believe. I have been watching the Democrats in congress ever since they took control back in January 2007. So far, their energy policy seems to be to do everything in their power to increase the cost of energy, and blame the resulting price increases on George Bush and the Republicans.
They prattle on about “alternative energy sources” and the need to “invest” in new technologies. But they steadfastly refuse to allow any existing technologies to be leveraged in the interim while these future technologies, some of which are 30 years or more away from being commercially viable, are brought to fruition.
This does not bother the Dems in the slightest however. If hot air were to be considered a greenhouse gas, they would certainly be in trouble, as they spout it continuously, pointing to the Republicans in general and President Bush in particular as the reason why energy costs are going through the roof.
Apparently, the Democrats want us to ignore the fact that they are now the majority party in both the House and Senate, and that if they really want to do something about the high cost of energy, they are the ones with the power to do so. Last time I checked my pocket constitution, it said that Congress was the Legislative branch of government. All laws are supposed to be passed there, and sent to the president to be signed. And yet, to hear them talk, the fact that we still have no rational energy policy is all President Bush’s fault.
Strange, I haven’t heard anything about Bush vetoing a whole slew of energy bills proposed by Congress. That is in actuality the only way he could thwart the plans of Congress to fix the problem. In fact, this president has pretty much the lowest record of vetoing bills in the history of the country. Granted, most of his lack of activity on the veto front was during the time that his party held both houses, but even so; you would think that if he had been vetoing major energy legislation there would have been some mention of it in the media, which never seems to otherwise miss an opportunity to whack Bush for something.
Fortunately for the Libs in the Democratic Party, they have another target they can demonize – “Big Oil”. And what’s even better, since President Bush was once an oil man himself, he and “big oil” can be linked in the public mind. Demonizing one rubs off on the other.
“Big oil” today is the “big tobacco” of yesterday. Having squeezed the tobacco companies for all they could get from them, and stigmatized them as an industry, they have now turned their sights on another large cash cow waiting to be milked – the oil industry. Except that, unlike the tobacco producers, squashing and stigmatizing the oil industry has ramifications for the entire economy, and the world food chain to boot.
Besides the obvious connection, that practically everything we buy is moved from point A to point B using oil, typically in the form of diesel fuel for ships, tractor-trailer rigs or trains, there are the less obvious things that we use every day that are also products of the oil industry. Things like antifreeze for your car, cleaning fluids, and pharmaceuticals. Things like diapers, cosmetics, and Vaseline (its petroleum jelly after all).
These are going up because somewhere along the line, petroleum products are used not just in their distribution, but in their production as well. Even items that on their face have no relationship at all to oil are increasing in price due to the increasing price of oil. Increased energy costs for example, make things more costly to manufacture as well as move.
Even more directly associated is packaging material. Many items sold today are packaged in plastic. Plastic bottles, formed plastic containers, bubble wrap, you name it. Plastic is ubiquitous. The bulk of plastics today are formed from polypropylene or polyethylene – long chain hydrocarbons, derived from oil and natural gas.
As the cost of the basic raw materials used to manufacture products increase, so eventually must the cost of the product derived from the raw materials. As businesses are in competition with each other, they are loath to raise prices unless they absolutely have to. Being more expensive than your competitor may cost you market share, which may translate into lower profitability. So businesses tend to try and absorb what they think may be short term price increases rather than immediately passing them along in an attempt to trade off short term losses for long term gains. This also has the effect of keeping short term prices stable. Imagine what it would be like to find every item in the grocery store, for example, priced like gasoline is, with new prices on a daily or even hourly basis.
However, when what appears to be a short term increase starts looking like a long term one, things change. Businesses, unlike governments, cannot afford to lose money indefinitely. They have shareholders they have to please, and workers they have to pay.
Remember that old saw that “a rising tide lifts all boats?” That works both ways. Rising costs affect all markets too; yours and your competitors. If all are forced to raise prices, then no competitive advantage is gained or lost. And prices are starting to rise, due to the increases in raw material costs; in this case oil.
Food costs are increasing. Not just because large farms require automation, and farm equipment is powered by gasoline, diesel and natural gas, all derived from oil. Not just because they are shipped to market via surface transportation, also powered by oil. But more fundamentally, because large crop yields require massive amounts of fertilizer.
There are three components to fertilizer; nitrogen, phosphorus, and potassium. The most common nitrogen fertilizer is ammonium nitrate (the same stuff that Timothy McVey used to blow up the Federal Building in Oklahoma City). And ammonium nitrate is produced in mass quantity using natural gas; so rising natural gas prices have driven the price of fertilizer up as well.
And why are these prices going up? According to the Democrats, the answer is simple. Greed. They must be greedy; during this time that millions of Americans are suffering with higher gas prices, they are posting record profits!
The government is posting record tax receipts as well. Do you hear the Democrats talk about “greedy politicians” too? Of course not. Leaving aside for a moment the fact that the term “greedy politician” is an oxymoron, how many Democrats have you heard recently propose that the government is taking too much money from the people and perhaps they should lower taxes in this time of need? Haven’t heard that, have you? Instead, the Democrats talk about how they need to raise taxes – only on the rich of course. Why? Because they are greedy, of course. And they can afford it. See a pattern?
So let's do a little comparison. It has been noted that the Oil companies make a profit of about 8 cents off every gallon of gasoline that is sold nationwide, regardless of the price. The bulk of the expense involved in the price of gasoline is the cost of the raw material, oil, itself.
The federal government on the other hand, makes 18.4 cents in tax on every gallon of gas sold, also regardless of the price. This is over twice the amount of profit that the oil companies make. And it isn’t the total “take” by taxing entities. The states get a cut as well. In some locations, there are county and city gas taxes as well. On average, Americans pay 45.9 cents a gallon in tax. The amount varies; some states take more, some less. Most, like the federal government, take a flat rate; some however charge a sales tax on gas. In those cases, the state take increases along with the price of fuel.
Yet the companies which actually produce the product are labeled “greedy” while the “profits” made by the government, which are purely parasitical in nature are evidently OK. They go for a greater good, after all, while the oil company profits only benefit the “fat cats” at the top.
So the Democrats have proposed a “windfall profits” tax on the oil companies. Please note that this too does nothing to lower the price of gas ; in fact, the price may actually increase. Taxes are after all, a cost of doing business, and are typically passed along to consumers in the form of higher prices. It does make sure however, that the government gets it’s “cut” of the profits.
You may have heard the term “windfall profits tax” as it pertains to oil companies, prior to this current round of price unpleasantness. That is because the government has done this before, in 1980, in response to the increase in oil prices brought about by the Arab oil embargo. At the time, government estimates were that it would bring in over $320 billion in revenue to the US Treasury; money that otherwise would, no doubt, be wasted by those greedy oil barons.
In point of fact, the tax only grossed $80 billion (net receipts were only around $40 billion, as the tax was deductible against corporate income), way below government expectations. Why?
The tax, which was an excise tax on oil rather than a tax on oil profits as one might believe based on its name, was levied on domestic oil companies and had the effect of penalizing them for purchasing oil from domestic sources and rewarding them for purchasing foreign oil. As a result, the domestic oil market went into decline, and the tax increased, rather than decreased our dependence on foreign oil sources. Domestic production declined 3 to 6 percent, while foreign imports increased 8 to 16 percent.
It has been said that those who fail to learn from history are condemned to repeat it. Should congress try this “punish the evil oil companies” sort of thing again, we may get to learn again first hand what we should have learned the last time we tried this. Wouldn’t it be a better idea to try something different instead?
While the so-called “windfall profits” tax may feel good, it will do little if anything to lower prices at the pump. It will benefit government to a certain degree; they will get some additional revenue, albeit probably much less than they think they will. Long term effects on the nation however will probably be negative rather than positive over all.
For us out here in the great unwashed, it is all blue smoke and mirrors. The government will gain the public approval to raise taxes in the guise of fighting evil. American oil companies will be punished for something they have little power over, namely the price of oil. And gas will continue to be expensive.
At least until the November elections. Anyone want to bet that prices will ease after that? Particularly if Obama is elected? No need for gloom and doom! Happy days are here again!
Just like when Clinton was elected, and magically the day after the elections were held, the “worst economy in 50 years” according to the Democrats, suddenly turned around – and he hadn’t even taken office yet!
One thing is probably certain; when it comes to the Democrats plans to fix our energy problems, should they take the Executive as well as both Legislative branches, you probably “ain’t seen nothin yet”.
When it comes to a meaningful response to the problem thus far, we all ain’t seen nothin yet; the “plan” so far has just been a big nothing.