That sound you DON'T hear is the point being missed

So, in today's Financial Times, the President of the US Chamber of Commerce (a really thinly veiled shill for the right), wrote a letter decrying the ill political wind blowing through Washington that is discussing a windfall tax on oil company profits. For those of you scoring at home, they made more money in a QUARTER than any other company had. Ever. Pharmaceutical, technology, internet, retail...NONE of them made the kind of money these barons did.

What this doofus apparently fails to notice is that he's carrying a banner for more oil, more oil, more oil. Well, when these companies are likely members of said Chamber (searched their site to find a membership roster and struck out), all he's doing is carrying their weight.

More importantly, he's missing the entire crux of the argument: WE DON'T NEED MORE OIL, STUPID, WE NEED LESS OIL AND GAS BECAUSE THEY'RE A LIMITED RESOURCE THAT SOMEDAY WE'RE GOING TO RUN OUT OF AND THEN WE'RE GOING TO BE SCREWED.

Geez, forest for the trees here, people.
_________________

A windfall tax on oil profits is not the way forward
By Thomas Donohue
Published: November 9 2005 20:19 Last updated: November 9 2005 20:19

Two months ago, the first of three hurricanes blew through the Gulf coast, causing widespread devastation. In many cases, people’s lives remain uprooted, businesses and workers are still disrupted and few know when life will return to normal.

Now another type of wind is blowing; the ill wind of political rhetoric. Buildings and homes are safe this time, but the US economy’s strength and resilience will be put to the test.

The problem: big oil had big profits last quarter. Despite hurricane damage to drilling platforms, pipelines and refineries, the oil industry made money and certain Republicans and Democrats on Capitol Hill are calling for a windfall profits tax, price controls, tariffs and other mandates.

It will not matter to some that oil industry profits are big because the industry is big, or that their rate of return is far less than other industries, such as banking, real estate or computers. The oil industry is guilty of making money. The global forces driving the economics of its marketplace are largely outside its control. The price for the raw commodity that it turns into gasoline, chemicals and heating fuels has gone up. A barrel of oil that cost $10 six years ago costs almost $60 today. The demand for oil has risen as the economies of developing countries such as China and India have grown.

Supporters of a windfall profits tax want to direct the oil industry and force investment in refinery expansions and exploration. Many of these same people have opposed such expansion activities for the past two decades. No new refineries have been built in a generation and none are likely to be built if Nimby (not-in-my-backyard) and Nope (not-on-planet-earth) persist in running our permit process.

Higher profits will drive capital toward new investments, but only if we allow more exploration where the oil can be found. There are 635,000bn cubic feet of natural gas and 102bn barrels of oil in the US that industry cannot produce because of federal access restrictions. Who do we blame? Industry for not drilling where there is no oil or the government for prohibiting drilling where the oil is?

The global forces driving the world’s economies are not going to be turned aside by new tax codes, investment directives or other restrictions, but consumers and shareholders could be at significant risk. The last time Congress tried a windfall profits tax – which was the last time oil industry profits rose precipitously – US domestic oil production fell 3-6 per cent, which caused oil imports to rise 8-16 per cent, resulting in a loss of 1.6bn barrels of US production.

Profits that could have been used some 20 years ago to improve the energy infrastructure, expand refinery capacity and increase domestic production were instead diverted to some unknown government programmes that today no one can identify.

Congress should consider the economic lesson taught by the last windfall profits tax: the more you tax something, the less you will get of it. While imposing a windfall profits tax might be emotionally satisfying in the short term to the consumer hard hit by higher prices at the pump, it will only lead to more pain down the road.

The tax will discourage investment in production, which will lead to less supply and higher prices. Consumers who own stock in oil companies either directly or indirectly through pension or retirement accounts also stand to lose. A windfall profits tax would decrease the value of oil company stock and could force oil companies to slash dividend payments. Tens of millions of investors and retirees depend on that income.

The US is the world’s biggest consumer of oil and we are at the mercy of the global supply market. If Congress wants to help consumers at home, tapping our domestic sources of oil would be a good way to do it.

Lifting the moratorium prohibiting exploration on our outer continental shelf would provide a 15-year supply of gasoline for 116m cars and heating oil for 47m homes. Allowing access to part of the Arctic National Wildlife Refuge would provide the US with about 900,000 to 1m barrels of oil a day for the next 30 years, cutting oil imports from the Persian Gulf region by 40 per cent.

We need to have abundant and affordable energy supplies to keep our economy healthy and our jobs secure. The way forward is not by new taxes on profits, government mandates or investment directed by politicians. The way forward is to let the free market work and let business make prudent decisions about those investments that are in the best interest of their stockholders and customers.