Bush And Oil Companies: “They Get By With A Little Help From Their Friend”
Why isn’t this a big surprise?
President Bush said Friday that taxing enormous oil industry profits is not the way to calm Americans’ anxieties about pain at the gas pump, and that his “inclination and instincts” are that major oil companies are not intentionally overcharging drivers.Bush’s remarks suggested the former Texas oilman is unlikely to take harsh action against oil companies despite public anger about the rising cost of fuel. Gasoline is averaging $2.92 a gallon across the country, up 69 cents from a year ago, according to AAA’s daily fuel gauge report.
With politicians concerned the issue could tilt what are expected to be close midterm elections this fall, the president and many in Congress have been rushing to offer solutions, most of which would offer little immediate relief.
Some Democrats have viewed this week’s announcement by major oil companies of huge first-quarter profits as a chance to renew their push for a windfall profits tax. But though a few Republicans, including Sen. Arlen Specter (news, bio, voting record) of Pennsylvania, have said the idea ought to be examined, Bush and most GOP lawmakers strongly oppose it.
“The temptation in Washington is to tax everything,” the president said in a wide-ranging news conference.
Instead, Bush called on Congress to ease regulations that make it difficult to expand the nation’s refining capacity. He also urged oil companies to plow their profits into finding and producing more energy, such as by building natural gas pipelines or pursuing renewable energy sources — all ventures that could further boost the companies’ bottom lines.
So a windfall profits tax is no solution….Wait! Why not drill in Alaska’s pristine Arctic National Wildlife Refuge (ANWR) and give $100 back to taxpayers who are losing thousands of dollars as they pay steep gas prices.
Well….many experts DO say ANWR drilling would not be a long or a short term solution to the problems the nation faces (and it would cause THIS GUY to turn over in his grave) — and do politicos really think that giving $100 back (the cost to fill a SUV or the cost of coffee at Starbucks) will make a difference to consumers (aka voters)?
Nah, who’d be silly enough to suggest that?
Senate Republicans sought to steal the show Thursday, unveiling a plan that would give taxpayers a $100 gas-tax rebate. But prospects for success were clouded, since the proposal is part of a larger package that includes language to open part of Alaska’s Arctic National Wildlife Refuge, or ANWR, to oil and gas drilling — a long-sought GOP priority that’s been repeatedly stymied by congressional Democrats and a few Republicans.“I think this is a bold bill that does everything possible to increase our supply and ease the burden on consumers,” said Senate Energy Committee Chairman Pete Domenici, R-N.M.
Democrats said Republicans were merely stealing their ideas while trying to sneak through favors for oil companies.“Americans are struggling to pay the rising cost of gas, and they are not interested in hand-outs to help oil companies make more money by letting them drill in wildlife refuges. The people want immediate relief and a new energy policy,” said Senate Minority Leader Harry Reid, D-Nev.
But the Democrats need to watch out, too. A new poll shows voters are angry at them as well as GWB on gas prices — and the entire political class could feel gas pains come November.
10 Responses to “Bush And Oil Companies: “They Get By With A Little Help From Their Friend””
The reason gas prices are so high is corruption among hedge fund managers who trade in oil futures. They’ve driven the price of oil up about 200% of what it should be. They regularly trade in insider information and collectively benefit as oil futures go up. Oil supplies are actually not very tight right now, despite what some pundits say. It’s all about “terrorism premiums,” speculation on growth in China and India, and insider information about refining capacity. The scandal is not the oil companies themselves, but the traders who cause crude oil prices to top $70 a barrel when they should be at about $30. If you’re wondering why I know this, I spoke recently with a friend who is an energy trader himself and he told me about his fellows in the industry who drive up oil futures. He says his particular specialty doesn’t actually engage in oil trading, but he sees this thing all the time. He says the government regulations that monitor, say, Wall Street traders do not apply for hedge fund managers.
the president and many economists are attempting to have the american people buy onto the same bull sold to the people of california during our faux energy/electrical crisis.
At that time we were told that the reason their were electrical power shortages was the fault of enviromentalists and regulations in regards to building new power plants. We were told that demand outweighed supply. We were told that deregulation hadnt gone far enough. The truth was, enron and other companies were manipulating the market and raping the californian people…this was done with the aide of the bushies.
Now we get to hear the same dreck.
If the american people buy this crap…they deserve what they get.
Speculating on what a particular price for a particular commodity “should be” is useless. The price is almost always exactly what it should be because that is what the market says it is. Now, if a commodity is in an overbought or oversold position, it will usually rebound to the mean, and often in violent manner. If oil prices are being manipulaed (as if any other price isn’t) some of those playing the game will get burned. Speculation is important to efficient markets. Speculating in or “running up the price” isn’t really corruption unless there is collusion, which isn’t very hard to prove.
The idea of a tax is absurd. Corportations do not pay taxes, they simply pass them on to the consumer. A tax will drive the price up and further reduce exploration and investment. This isn’t the first time we have had a windfall profits tax (there is no such thing, by the way, as a “windfall profit”), in the 80s, and it was a disaster.
Funny how nobody was passing the hat when oil companies were going belly up. And funny how the governmental impulse is to basically run the price of refined gasoline higher, while continuing to collect as much as 2x (federal;include state taxes and it gets worse) the profit that the oil companies–that actually do the investing, exploring, etc.–get out of a gallon of oil.
I don’t see a parallel between the current situ and CA/Enron. I’m not a fan of the oil companies, but ignoring the regulation/environmental strictures is only looking at half the picture.
Bush is right about the tax–a windfall profits tax isn’t the answer. Neither is the $100 check, an attempt to buy off some voters.
Bacci, I’m with you.. energy providers need to be regulated. Many industries don’t, but utilities aren’t one of those industries.
//President Bush said Friday that taxing enormous oil industry profits is not the way to calm Americans’ anxieties about pain at the gas pump, and that his “inclination and instincts” are that major oil companies are not intentionally overcharging drivers.//
*finally snaps*
wtf does this guy have to do to get kicked out of office? what HASN’T he done?
I was just listening to NPR. They JUST said that $100 check would come from, get this, future profits from drilling in ANWR. Yup, here’s a hundred bucks, now we’re headed to the refuge..suckers. I guarantee the oil company execs were loving Frist when he proposed that crap.
Thanks for continuing to post this stuff Joe.
Gee, I thought that high gas prices were a good thing. Drives incentive towards alternative technologies, and all that.
Oh, that’s right. As long as it’s the government driving up the price (and squandering yet more taxpayers’ money) it’s okay. But if the eveeel corporations are making some money, that’s bad.
I love the $100 check idea! It’s both ridiculous and insulting at the same time!
I love it when political hacks get all populist. But I don’t think it’s gonna play well in the “heartland” this time.
Here’s the NY Times on the role of hedge fund managers.
Times
They don’t talk about collusion, but my friend in the business says it happens. Basically traders IM each other every day with information they receive from people inside the oil business and then help push the price of oil up. This isn’t Wall Street, so there is no SEC or other serious enforcement mechanism against insider dealing. As the article suggests, much of this trading is going on overseas (London, for example).
There is, of course, a kernel of truth inside the speculation, as Daniel says. The traders aren’t speculating on pure fantasy. And yes, they can all get burned. Some did get burned when the predicted a major fall in oil prices just before Katrina hit (the NYT article mentions it). But futures pricing adds a speculuative dimension that can result in prices wildly off the mark of where they should be. Theoretically that should be temporary. Using objective indicators (actual terrorism, actual oil supply, actual demand, etc.) oil should be trading at $30 a barrel. Remember, it was $18 a barrel in 2002, so a $30/barrel price is actually a substantial increase in 4 years and reflects increased demand in China and India. But hedge fund managers have helped push a rise that should have gone to $30 way up to $75. As long as there is major uncertainty that hedge fund managers can cite, there is no reason for them to start selling off futures and driving the price down. Only major conservation will drive the price down.
Interesting article, Elrod, although I am reflexively skeptical to attach so much blame/credit just to hedge fund managers. I-banks, futures traders, Pension funds (a HUGE presence)etc. are all playing in the same game. Granted, there may be another LTCM out there, but what is interesting is the acknowledgement that oil is in fact an investment and that capacity is driving price.
What concerns me is not that hedge managers per se are in the market, but that, just as we saw on a ore prosaic sclae during the tech bubble, investors not versed in the market are getting in hoping to ride the wave. That is potentially a greater danger.