Wednesday, November 09, 2005

Big Oil

It is not surprising that the oil companies are under fire from congress for reaping record profits during the recent price run ups. Oil is an easy mark, a popular political target on the left and with few defenders elsewhere.

But wait - why do so many people so loathe "Big Oil"? First, is there any other type of oil company? Small or medium sized oil perhaps? Oil is one of those things that has great economies of scale and it makes all the sense in the world for large corporations to be moving huge quantities of oil and gasoline into the market. If it didnt, then small oil would be undercutting prices on Big Oil like crazy and getting rich quick. In fact, Big Oil purchases vast amounts of crude oil on a global market, refines it, and then puts it at gas stations all over our country so that our vehicles can run. As long as Big Oil is not colluding to commit monopolistic price gouging, then we may assume that the competitive market will price gas and heating oil correctly. Big Oil's record profits may raise eyebrows, but consider for a second: without Big Oil, you would be going to work in a horse drawn carriage.

So what did Big Oil have to say for itself at the hearings? Did it cringe and blush and hide and apologize? Nah. They said hey congress, forget about any windfall profit tax. And (according to Reuters, bias beware) they were not particularly interested in donating money to help poor Americans pay heating bills. OK, sure thats fine with me. It doesn't look like any kind of windfall profit tax is in the works in any case, and donations to the poor ought not to be squeezed out by congressional pressure. But now it really starts getting good:

"The companies, which earned a collective $30 billion in the
third quarter, also surprised lawmakers at a Senate hearing by
saying they didn't need the billions of dollars in tax breaks
and energy incentives recently approved by Congress.

The oil executives dismissed the impact of $14.5 billion in
tax breaks and incentives in the energy law Republicans pushed
through Congress last summer. Since then, lawmakers have been
searching for ways to cut as much as $50 billion from federal
spending to curb the budget deficit.
"

Now, my friends, we are talking.

What was it that Reagan said about Democrats' philosophy? "If it moves, tax it. If it keeps moving, regulate it. If it stops moving, subsidize it."

How refreshing to see this move in the direction of free markets and smaller government. Hurrah for Big Oil.

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