Written on Friday, July 15, 2011 by Nathaniel Davidson
A recent Patriot article asked, $6 Gas by Summer? Naturally, motorists will be angry at the added expense they can see. Americans in general might notice higher prices in general, not least due to increased transport costs. Many will look for someone to blame, and unscrupulous politicians love to find a scapegoat.
“Greedy” oil companies v the greedy tax man
Oil companies have long been a favourite target. A favourite sport of Congressional demagogues is hauling oil executives before them and berating them for their “greed”. They dare not answer back because Congress has usurped the power to issue, and more importantly, to deny permits to drill. Just think of the recent bullying by the current gangster government in defiance of court orders.
But if they dared to answer, they could truthfully respond to the cheap grandstanding and hypocrisy (see also The Greed Myth):
Our “greed” is nothing compared to that of politicians! We make only about 8% profit. Yet we spend millions to find oil; drill through sometimes seven miles of earth; deliver it in expensive ships, pipelines and trucks; purify it carefully—with more costs due to state requirements to pollute good fuel with ethanol to pay back its lobby. Yet we still deliver a liquid cheaper than the bottled water and soft drinks sold by the same gas stations!
“Taxes add more to the price than our profits—probably three times more. The federal government takes 18.4 cents a gallon in taxes; Iowa takes another 22 cents a gallon, and California 61 cents. So those who buy gasoline in Iowa must fork out 40.4 cents per gallon, and Californians 79.4c, to satisfy your greed for more money to buy votes. And you take this money by force, just because you can. You contribute nothing, but mooch off our hard work, like the slavers of old.
The real reason: supply and demand
Really, the “greed” explanation is absurd on the face of it. It would imply that oil companies magically become greedier during times of oil crisis and less greedy in times of plenty.
But high prices are really a symptom of the problem: we haven’t enough oil in the economy. And in a market economy, they provide two signals: 1) consumers: use less; 2) producers: find more. But some economically illiterate Democrats and RINOs try to put a lid on prices, hence the price controls of Presidents Nixon and Carter, and “anti-gouging” laws by socialist governors (of both parties).
But thus just hides the symptom, not the underlying problem. It would be like Michelle Obama trying to control childhood obesity by fighting for a law that forbade bathroom scales from registering above a certain weight (see also Socialism: Stupidity and Arrogance). The only way to have genuine lower prices is to get more oil. But liberals have consistently blocked us from using our own oil.
This includes the Democrats and the RINO McCain, who blocked drilling in a tiny fraction of the bleak Alaskan wilderness—about 2,000 acres of the 20 million acres of ANWR—against the wishes of the Alaskans. This would have gained billions of barrels of oils. Similar short-sighted policies have blocked much off-shore drilling, and exploiting the estimated trillion-plus barrels of shale oil in Wyoming, Colorado and Utah. (See this explanation by economist Dr Thomas Sowell (about three minutes in)):
Liberals like Clinton scoffed at trying to solve the oil shortage by opening up America to drilling, because it would take 10 years to deliver the oil to the consumers. But that was over 15 years ago, and the oil is still uselessly in the ground! Similarly Obama said: “no way that allowing offshore drilling would lower gas prices right now. At best you are looking at five years or more down the road.”
But not only are they absurdly short-sighted, they are also economic buffoons. In reality, economist Dr Walter Williams pointed out in 2008 that the oil price would drop today, even if the oil were not available for years:
Put yourself in the place of an OPEC member knowing there would be a greater supply of U.S. oil five or 10 years, hence maybe driving oil prices lower to say $40 a barrel. What will you want to do now while oil is $130 a barrel? You would want to sell as much oil now and OPEC’s collective efforts to do so would put downward pressures on current oil prices. Right now the U.S. Congress is OPEC’s staunchest ally.
This indeed happened later that year when GWB lifted the moratorium on offshore drilling. Even the possibility of more home-grown oil caused a big price drop.
Speculators: an alternative villain
Obama, consistent with his hatred of free enterprise, recently blamed “speculators”, again not addressing taxes, just as his lame opponent McCain had done (see also the Patriot article U.S. Team to Study Whether ‘Speculators’ Driving Up Pump Prices). Yet speculators perform an important function in reducing wild price swings and conservation. Suppose that during a time of low oil prices, a speculator thinks that it might become expensive a few years from now. He might buy a large quantity fairly cheaply, but his act of buying keeps the price from dropping too sharply. And as he intends to sell later, he stores this oil—preventing it being consumed. If he is right about a price rise later, he sells at a good profit—but at least there is oil to buy, rather than the shortages of the 1970s. And the extra supply keeps the price down.
Intended or unintended consequences?
Normally, liberals assume that if the economy or a certain group is disadvantaged, it was intended by evil people. Conservatives realize we live in an imperfect world, with flawed people who are limited in knowledge, hence unintended consequences (see How the Left has always exploited “crisis”). Hence for the previous oil shocks, I blame economic stupidity rather than evil intent.
But I make an exception if someone has revealed his intent to produce bad consequences. Obama has done just that by his words and deeds. As shown on a Patriot video clip, Obama wanted energy prices to skyrocket, and prove this by appointing Stephen Chu as energy secretary. Chu said, “Somehow we have to figure out how to boost the price of gasoline to the levels in Europe”—which, thanks to enormous taxes, are equivalent to $10/gallon, and they don’t have the huge distances we have.
Furthermore, Dinesh D’Souza’s groundbreaking book The Roots of Obama’s Rage points out that Obama tells us that he is following “Dreams from my Father”—a communist, atheist, philanderer killed while DUI, who also wanted to bring down the “colonialists” including America. This thesis explains even more of Obama’s actions than the obvious fact that Obama is a fanatical Watermelon—Green on the outside, Red on the inside.
One example D’Souza brought up was Obama’s ban on American oil drilling, while supporting oil drilling in Brazil. A later Investors.com article Obama: Drill, Brazil, Drill! points out:
We have noted this double standard before, particularly when — at a time when the president was railing against tax incentives for U.S. oil companies — we supported the U.S. Export-Import Bank’s plan to lend $2 billion to Brazil’s state-run Petrobras with the promise of more to follow.
Now, with a seven-year offshore drilling ban in effect off of both coasts, on Alaska’s continental shelf and in much of the Gulf of Mexico—and a de facto moratorium covering the rest—Obama tells the Brazilians:
“We want to help you with the technology and support to develop these oil reserves safely. And when you’re ready to start selling, we want to be one of your best customers.”
By analogy with Rush Limbaugh below, if you support Obama and the Dems, then you deserve to suffer from high gas prices!