Monday, May 05, 2008

Windfalls and Hot Air

Mark Finkelstein at Newbusters has an interesting analysis of Sen. Clinton’s TV appearance this weekend. In discussing high gasoline prices, no fewer than 13 times does she make a verbal attack on oil companies, suggesting very strongly that their gouging behavior is why we are paying upwards of $3.50 for a gallon of gas, and suggesting (evidently in her world supply curves never shift left) that we can impose a “windfall profits tax” without affecting the incentives to produce oil. Several questions suggest themselves:

1. If oil companies can gouge, why didn’t they have enough sense to gouge in 1998, when I could get gas for less than $1.00 a gallon? Why did they watch oil prices plummet from $39 to $11 a barrel in the early to mid-1980s?

2. If “windfall profits” justify a “windfall profits tax,” do “windfall losses” justify “windfall losses subsidies”? (I am almost afraid to ask that one, for fear that the answer for most politicians will be “Yes.”)

3. If oil companies gouge gasoline prices, why do gasoline and crude oil spot-market prices move in lockstep over decades, even though both prices are set by the interaction of thousands and thousands of traders in highly competitive markets? Can speculators really be orchestrating prices to this degree?

4. How is it that we have access to any gasoline at all, given the dramatic rise in demand for oil in rapidly developing societies in Asia, South America and elsewhere? How did it come to be that our gas pumps are full rather than empty in such circumstances? Did it have anything to do with risk-taking and initiative by oil companies? If we tax “windfall profits,” will it make it easier or harder for Americans to procure the products that rely on crude oil?

5. Given that the big Western oil companies control less and less of global oil supplies (and state oil companies in places like Russia and Venezuela control more and more), why are oil companies still the target of anger among a certain sort of politician as much as they were in the 1970s? Could more state control over oil have anything to do with falling production in places like Venezuela, and could that have perhaps more to do than Big Oil with tighter global supplies?

Sen. Clinton is running for president on the platform of being ready for work on day one, so I’m just askin’.



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