In the
now-familiar century-old ritual of corporate punishment, the U. S.
Senate judiciary committee yesterday ordered members of the Big Oil's
CEO chain gang to explain themselves. Which they did, very effectively.
Whether any of the demagogic politicians were inclined to hear the
message is another matter. The committee chair is Vermont Senator
Patrick Leahy, from a state not known for its firm grasp of the oil
business or even market economics; the other Senator from Vermont,
Bernie Saunders, is a socialist radical known in some circles as
"Vermont's Communist Senator."
The gap between Leahy and Saunders
is a small one. Yesterday, Leahy lit into oil industry profits, oil
executive salaries, and the oil industry's alleged links to President
Bush. "The president once boasted that with his pals in the oil
industry, he would be able to keep prices low and consumers would
benefit. Instead, it is his pals in the oil industry who have
benefited," Leahy said. "Why has the price of oil increased 400% since
President Bush took office?"
As the price of oil topped US$130 a barrel, the best U. S. politicians can come up with as a response is blind partisanship and destructive policy initiatives aimed at attacking the oil industry. Among the dumb ideas is the Consumer First Energy Act, to impose a windfall profit tax on U. S. oil firms. Another plan would force U. S.-based oil companies to disclose money they pay foreign governments for resources.
The dumb self-destructive futility of these political inquisitions into corporate America -- rituals that date back through to the Robber Barron myths of the 19th century -- has always been lost on most Americans, even as they paid a price. The great power of the U. S. national market economy could always pull the country out of the worst effects of mounting levels of government control and regulation.
The post-Enron Sarbanes-Oxley overkill began to show that the ability of the U. S. economy to overcome major blows to its corporate sector was weakening. During the oil and inflation crises of the 1970s and 1980s, price controls and regulatory corporate attacks were eventually shoved aside, minor irritants in the great national economic enterprise. Sarbanes made the great enterprise look vulnerable. This current oil price crisis, if it becomes that, could prove to be a major watermark in the declining capacity of the U. S. to weather regulatory storms and political attacks on the markets that give America it's economic strength.
If no one in America's political system pays attention to the messages delivered yesterday by the executives of the oil firms to the Senate judiciary committee, then U. S. economic fortunes are destined to decline. The politicians are living in a 1960s fantasy world, playing old and mythical Marxist themes on the alleged power of giant oil capitalists to control, manipulate and direct energy markets at the expense of the common man, the consumer.
The Big Oil giants that appeared in Washington yesterday were actually pipsqueaks in the new global energy market. Exxon Mobil, Shell, BP, ConocoPhillips have no more control over oil supply and prices than the owner of a corner gas station. CononoPhillips executive vice-president told the committee that in the 1960s as much as "85% of the global oil and natural gas reserves were available for direct development by international oil companies, versus only 7% today."
What kind of impact do politicians expect to have if they go about policy with the idea that the few executives standing before them--and the media--are the powers behind the price of oil? Price controls, tax grabs and new regulations can only damage the few remaining market-based links in an industry that is now largely controlled and regulated by foreign governments.
Shell president John Hofmeister tabled a report from the Argonne National Laboratory listing 40 U. S. laws and regulations that prevent, delay, limit and/or increase costs in the gas industry. Hundreds of lawsuits hamstring development. Similar obstacles to energy development are building in Canada, forcing oilsands projects into retreat. Imperial Oil's Nearl project is now before the federal Cabinet, awaiting a jumpstart following a botched legal processs. Will Canadian politicians behave any differently that their American counterparts?
The oil industry's main message was aimed at getting U. S. politicians to act on policies that can actually increase oil and gas supplies: Remove obstacles to new exploration and development and resist the temptation to impose new taxes and constraints that will limit the oil industry's ability to operate.
In the past, the United States could afford to shoot itself in the foot, confident that its economic power could repair the damage. The current state of the world energy markets are such that current misguided policies, let alone new ones, are much more than a shot in the foot. Source
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