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Lessons in Leftist Logic: Raise Taxes to Bring Down Gas Prices
Posted By Tait Trussell On April 28, 2011 @ 12:15 am In Daily Mailer,FrontPage | 17 Comments
It’s never the president’s fault. And oil companies are always the easy target.
In President Obama’s narrow vision, any problem for him is always somebody else’s fault. Rising gas prices? The oil companies are to blame.
In his free-market-distrusting mindset, he sounded his belief April 22 that these companies should be making less profit and paying more taxes. On April 26, he called for an end to all oil company tax breaks.
A few days earlier, it was oil speculators who were to blame for high gas prices. In his radio address, April 23, in an apparent state of confused frustration, Obama said: “The truth is there’s no silver bullet that can bring down gas prices right away.” He added, “Instead of subsidizing yesterday’s energy sources, we need to invest in tomorrow’s.” That means, of course, wastefully subsidized green energy.
On April 21, the White House announced a task force menacingly called the Oil and Gas Price Fraud Working Group. It is supposed to investigate “fraud and manipulation” in oil markets that could affect gas prices. On that day, he said at a Nevada town hall meeting, “Four billion dollars of your money are (sic) going to these [oil] companies at a time when they’re making record profits and you’re paying near record prices at the pump…It has got to stop!” he commanded.
Obama also promised, “We will be vigilant in monitoring the oil and gas markets for any wrongdoing so that consumers can be confident they are not paying higher prices as a result of illegal activity.” The president’s ever-ready public protector from others’ misdeeds, though not his own, Attorney General Eric Holder, quickly issued a statement vowing that he would take “quick action.”
Holder has put together a team of pseudo-detectives to scratch for any evidence — he dearly hopes to find — of fraud or illegal manipulation that might affect gas prices. This comes at a time when crude oil prices continued to move upward and gasoline prices at the pump climbed toward $4.00 a gallon nationwide.
“Rapidly rising gasoline prices are pinching the pockets of consumers across the country,” said Holder, revealing his nose for news that no one else knew.
Obama also has boldly declared: “Any claim that my Administration is responsible for gas prices because we’ve, quote unquote, ‘shut down’ oil production—any claim like that is simply untrue. It might make a useful sound bite, but it doesn’t track with reality.”
Reality, however, smacked Obama in the face: the Environmental Protection Agency revealed April 25 it is shutting down a Shell Oil Company drilling project off the coast of Alaska after the company has spent five years and $4 billion of its money in preparation for drilling.
The American Petroleum Institute has responded to Obama’s blame game by calling the energy policies “alarming.” API President Jack Gerard said: the administration has chosen “inaction on essential energy projects that would create jobs, drive economic growth, and boost federal revenues…. The best thing the administration can do on gasoline prices is to encourage greater oil production and greater fuel efficiency here at home. Launching another gasoline price investigation, when it’s obvious strong demand and world events are driving today’s markets, is pointless.”
Gas at the pump typically spikes in the spring. What pesters Obama is that as oil prices rise, his poll numbers fall.
Historically, as crude oil prices have increased, so have fuel prices. The reverse is true, too. The gradual growth in the global economy is increasing demand for oil and gas. Although growth is centered in Asia and the Middle East, U.S. demand also is growing.
The “biggest single component of retail gasoline prices is the cost of the raw material used to produce gasoline—crude oil,” the American Petroleum Institute acknowledges in its publication “What’s Up with Fuel Prices.” But “other factors—including weather events, geopolitical risks, inventories, exchange rates, and spare capacity—also have an impact…”
In spite of persistent Democrat attempts to appeal to the naïve by claiming that oil companies make huge profits, “Oil and natural gas earnings are typically in line with the rest of the manufacturing industry, averaging about 7 cents of every dollar of sales over the past five years. Critics usually focus on only half the story—profits. Profit margins, or earnings per dollar of sales (measured as net income divided by sales), provides a better way to compare financial performance among industries of all sizes.
Also, contrary to critics’ charges, oil companies aren’t owned just by a little pack of stingy and wealthy insiders. The 55 million households with mutual funds, the 45 million with personal retirement accounts, and millions of other stockholders typically have some of their money in petroleum stocks.
Although Obama desperately wants to hike up taxes on oil and gas companies, they already bear an effective tax rate of 48.4 percent, according to API statistics, compared with 28.1 percent for all other S&P industrial companies. A study by the research firm Wood Mackenzie (WM) found that from 2011 to 2025, negative economic consequences of higher taxes will more than offset any short-term gains in tax revenue. The study also found that increased access and development of domestic oil and natural gas would create an added half million jobs by 2025.
WM said that oil and gas companies paid $1 trillion in total income taxes from 1980 through 1008 and more than $178 billion to the government in rent, royalty, and bonus payments from 1982 through 2009. The oil and gas industry provides the Treasury with more than $95 million every day. The industry supports more than 9.2 million U.S. jobs.
If only Obama would give up the blame game and allow oil and gas companies access to domestic resources now off-limits, this could create hundreds of thousands of jobs in our jobless economy. Gas prices could even trend downward.
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