Big Oil makes a big target

Last week’s House vote in favor of fining and imprisoning “price gouging” oil executives and independent retailers stunningly demonstrated the bipartisan willingness to demagogue almost anything to pander for votes.

Last week’s House vote in favor of fining and imprisoning “price gouging” oil executives and independent retailers stunningly demonstrated the bipartisan willingness to demagogue almost anything to pander for votes.

Think about it. Three hundred eighty-nine members actually voted to criminalize something they couldn’t even define and then ordered the Federal Trade Commission to come up with a definition of just what it was they were criminalizing. Economists contacted by newspaper reporters and others were hard-pressed to define “gouging,” but at least one intrepid Republican state attorney general suggested in essence that “gouging” is a lot like pornography, in that he’d know it when he sees it.

In a sense he got it right, because price gouging, excess profits and the like often exist more in the eye of the beholder than in the real world.

Indiana’s Rep. Mike Pence (R) observed recently that Congress is good at doing two things, nothing and overreacting, and often does both simultaneously. That is an almost perfect description of the way Congress is dealing with energy problems these days and means that when the smoke clears it will have done little to deal with the real problems driving up fuel costs.

People understandably don’t like it when prices for things they need go up. Homebuyers looking for shelter in the D.C. market, for example, constantly complain about the profits reaped by sellers, and the providers of everything from cable services to downtown parking spaces are routinely dismissed as moneygrubbers who charge more than they should for whatever they have to sell.

Politicians tend to try to get out front and channel consumer anger when it can be focused on a few big bad guys but fall strangely silent when the “gougers” are smaller and more numerous. Thus few have gone around condemning those who sell their homes for five times what they paid for them because, since there are just about as many sellers as buyers, there is little net political gain in demonizing them. Fortunately for congressional panderers, there are fewer oil executives than homeowners, so they are an inviting target.

Many, if not most, members of Congress privately admit that the current increase in gasoline prices is a result not of a conspiracy but of market forces operating in a world in which the demand for petroleum products is going up much faster than the supply. Some will even admit that Congress itself may have contributed to the problem with bans on exploration in this country or by eliminating all but the most expensive and impractical alternatives to oil.

Whatever the reason, however, it is a fact that we live in a world in which more and more customers are chasing a commodity that isn’t being produced at a fast enough rate to keep up with the increasing demand. The result is higher prices, which will ultimately alter our behavior, stimulate more exploration and production or make billionaires out of those who come up with viable alternative fuels.

None of these things, however, will happen overnight, and as a result politicians look for symbolic methods to exploit consumer anger in ways that will benefit them. This leads to the sort of vote that took place last week and to the increasing demand that we enact an “excess” profits tax on big oil. Such proposals have everything to do with politics and nothing to do with reality.

Facts are stubborn things when they get in the way of a good argument. Thus, few advocates of an excess-profits tax can tell you what they mean or how much Big Oil is taxed in comparison with other companies.

It turns out that the oil companies pay an average of 39 percent of their gross income in taxes. That doesn’t mean much taken in a vacuum, but given congressional demagoguery one has to assume that other businesses are paying much, much more.

It seems, however, that other big companies pay an average of 34 percent. Thus, oil companies with all their vaunted tax breaks actually pay more than other companies in taxes. How can this be?

It would seem to me that advocates of taxing them at even higher levels should be required at least to explain this simple fact. After all, it is their firm conviction that Big Oil controls George W. Bush, Dick Cheney and the Republicans who run the Congress. How is it then that with the president, vice president and the Republican congressional leadership in their pocket the oil moguls can’t at least get their tax burden down to that paid by others?

It is, as they say, a puzzlement.

Keene, chairman of the American Conservative Union, is a managing associate with Carmen Group, a D.C.-based governmental-affairs firm (