Supply, Demand and the GOP
Tuesday, April 25, 2006 :::
The Wall Street Journal has more on the story of how House Speaker Denny Hastert and Senate Majority Leader Bill Frist are fighting mad about high gas prices. And so, too, is the President:
Mr. Bush is expected to instruct the Justice Department, the Federal Trade Commission and the Energy Department to vigorously enforce laws relating to price gouging. And the attorney general and FTC chairman will send a joint letter to all 50 state attorneys general calling on them to use their broader investigative powers to pursue illegal gouging, according to a senior administration official. They also will offer assistance to states that need it.
That's all fine and dandy, if you're in the market for a grandstanding attorney general. And almost on cue, one of the biggest stage hams is leaping to the fore:
New York Attorney General Eliot Spitzer, a Democratic candidate for governor, said he is investigating whether oil producers are improperly boosting prices. He said the problems are "once again, demonstrative of the complete failure of energy policy that we have seen out of Washington over the last five years."
Whenever Eliot Spitzer takes the lead on a headline-making issue, it's almost guaranteed the problem is less with the markets than it is with scoring quick political points.
Which is where this Journal editorial comes in. Are drivers really at the mercy of unscrupulous oil companies? Not really. Instead, we're reaping the whirlwind of shoddy congressional decision-making:
A decent portion of the latest run-up in gas prices--and the entire cause of recent spot shortages--is the direct result of the energy bill Congress passed last summer. That self-serving legislation handed Congress's friends in the ethanol lobby a mandate that forces drivers to use 7.5 billion gallons annually of that oxygenate by 2012.
At the same time, Congress refused to provide liability protection to the makers of MTBE, a rival oxygenate getting hit with lawsuits. So MTBE makers are leaving the market in a rush, while overstretched ethanol producers (despite their promises) are in no way equipped to compensate for the loss of MTBE in the fuel supply. Ethanol is also difficult to ship and store outside of the Midwest, which is causing supply headaches and spot gas shortages along the East Coast and Texas.
So in a way, Spitzer is correct: we are paying a price for the lack of a coherent energy policy. While he offers no solutions of his own (other than another corporate shakedown), a not inconsiderable portion of the current price spike can be laid directly at the feet of the same congressmen who now bray for the blood of ExxonMobil.
And just in case the agonizing Republican drift over the last few years hadn't given the base sufficient reason to rethink its early November travel plans, even more reasons for going fishing on election day are on the table:
Speaker Denny Hastert and Senate Majority Leader Bill Frist fired off a letter to President Bush yesterday demanding the Federal Trade Commission and Justice Department investigate "price fixing" and "gouging." Senator Arlen Specter wants to go further and impose stricter "antitrust" laws for oil companies, as well as a "windfall profits" tax. Mr. Hastert also delighted the class warriors in the press corps by lambasting recently retired Exxon CEO Lee Raymond's pay "unconscionable."
Ah, the windfall profits tax. One of the most destructive ideas to come out of the Carter years is once again finding new life under a self-described Republican Congress.
History should tell the worthies that punitive taxation does nothing except destroy the incentives for businesses to invest -- which in this case would include pouring money into developing new oil reserves in Canada and the Western United States. But sticking it to the oil companies feels good -- and it makes politicians look like they are on the little guy's side.
And that's the problem. Congress isn't on the little guy's side at all. They are on no one's side except their own. And until that changes -- be it at the ballot box or through some Road to Damascus moment -- there will be no relief for little guys, big guys or anyone else.
::: posted by Norman Leahy at 4/25/2006