Congressional Grandstanding on Oil Prices
Wednesday, April 2nd, 2008 By Marc Kilmer
Yesterday saw the yearly political theater of Congressmen who are ignorant of basic economics bringing oil executives up to Capitol Hill so they can berate them for the TV cameras. Oil prices are basically driven by three things: supply, demand, and government policy. Of course, Congressmen like to spin the narrative that these prices are set by evil corporations to fatten their wallets.
This may satisfy populist anger at oil companies, but it has nothing to do with reality. Interestingly, you never hear any outrage at these hearings at how the high rate of taxes on fuel (over 18 cents a gallon at the federal level and 26 cents a gallon at the state) contribute to higher fuel prices.
Far more dangerous than the usual Congressional bloviating is the desire of some in Congress to raise taxes to punish these companies for supplying our energy and use that money to pay for alternative energy research. Of course, many of these alternative energy sources (such as biofuels) are a scam, as even Time magazine notes:
But several new studies show the biofuel boom is doing exactly the opposite of what its proponents intended: it’s dramatically accelerating global warming, imperiling the planet in the name of saving it. Corn ethanol, always environmentally suspect, turns out to be environmentally disastrous. Even cellulosic ethanol made from switchgrass, which has been promoted by eco-activists and eco-investors as well as by President Bush as the fuel of the future, looks less green than oil-derived gasoline.
Meanwhile, by diverting grain and oilseed crops from dinner plates to fuel tanks, biofuels are jacking up world food prices and endangering the hungry. The grain it takes to fill an SUV tank with ethanol could feed a person for a year. Harvests are being plucked to fuel our cars instead of ourselves. The U.N.’s World Food Program says it needs $500 million in additional funding and supplies, calling the rising costs for food nothing less than a global emergency. Soaring corn prices have sparked tortilla riots in Mexico City, and skyrocketing flour prices have destabilized Pakistan, which wasn’t exactly tranquil when flour was affordable.
A couple of Buckeye Institute articles on the foolishness of raising taxes on energy companies can be found here and here.
Tags: Economy
