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Thursday, June 13, 2024

Obama’s, McCain’s oil price charades

Playing a populist game unfit for any intelligent politician with a conscience, Barack Obama has a proposal -- tax the "windfall" profits of oil companies -- that would make your gas-pump prices soar even higher than now.


Playing a populist game unfit for any intelligent politician with a conscience, Barack Obama has a proposal — tax the "windfall" profits of oil companies — that would make your gas-pump prices soar even higher than now.

The basic assumption of the game, of course, is that a great many Americans are dummies who don’t understand the fundamentals of economics, much less the intricacies of energy production, and that you can get their vote-for-me juices flowing by making Big Oil the scapegoat for the misery of $4-a-gallon gasoline.

For people to believe the narrative, they have to ignore a couple of elephants in the bathtub: the burgeoning economies of China and India. Throw hundreds of millions of newly enriched buyers into competition for scarce products (and all products are scarce to some degree) and what happens? Prices soar. Matters get worse when you have a Mideast cartel and other factors limiting supply.

America’s oil companies could not act on their own to raise prices exorbitantly if they devoted themselves maniacally to the effort every day of the week from here to the end times. If they could, why would we have had cheap oil prices through most of our history? The fact is, their costs have gone up as prices have gone up, and their profit margins are nothing compared to those of a number of other industries.

Right now, they need to make decent money because they need to meet those costs, encourage investment, explore for new fields and get more oil on the market. That’s the path to lower prices, whereas demagoguery propels us in the opposite direction.

This last statement is not guesswork, or the result of theory alone. It is based on hard, empirical evidence, including what happened following a tax hike on oil in the Carter years. Gas prices went up because enacting the tax was roughly as sane as someone who is losing a race shooting himself in the foot. After Ronald Reagan was elected, everybody got together to stop the shooting, and guess what? Prices went down.

Keep in mind that Obama has been promising to be a different kind of politician, one who will bring positive change to Washington. Yet, the more we hear from him, the more we learn he is addicted to past rottenness. As he has suggested, ties to special interests may be part of what has afflicted us (note his ties to unions, his rants about NAFTA, his support of the farm bill, his enthusiasm for the ethanol boondoggle), but the bigger problem is kowtowing to popular prejudices for the sake of electoral success (as he has done in his attacks on CEO salaries and balderdash about tax breaks for the rich).

The answers to our energy mess are complex, but we would now be in far better shape if Democrats had not blocked drilling for oil in Alaska and offshore or opposed using a national depository in Nevada as a final resting place for nuclear waste. Obama is hardly challenging these stupidities. He sees nothing here to be changed.

Sadly, the presumptive Republican candidate, while not going so far as Obama, is hardly a friend of common sense on some energy questions, either. John McCain grumbles about "obscene" profits (I really don’t think he understands commerce) and opposed drilling in the massive Arctic National Wildlife Refuge, forgetting that the area of exploration was smaller than Dulles International Airport near Washington, and, as the columnist Jonah Goldberg wrote after a visit, out of reach of tourists, dark most of the winter and, in the summer, muddy and mosquito-infested.

The election of 2008 is shaping up as the not-quite-as-bad election. Obama is awful, and McCain is not quite as bad.


(Jay Ambrose, formerly Washington director of editorial policy for Scripps Howard newspapers and the editor of dailies in El Paso, Texas, and Denver, is a columnist living in Colorado. He can be reached at SpeaktoJay(at)

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