Stabenow's a quart low

During her recent meeting with local constituents, U.S. Senator Debbie Stabenow revealed her complete ignorance of economics and history while condemning the oil industry.

She called Exxon Mobil’s recent profits “outrageous.” I wonder how she would characterize the fact that from 1977 to 2004, taxes on gasoline swelled state and federal treasuries by $1.34 trillion while oil companies earned $640 billion. If oil company profits are “outrageous”, what should we call the government’s take? “Criminal” is one word that comes to mind.

Her claim that the oil industry lacks competition is blatantly false. One would hope that senators offering “solutions” to high gasoline prices understand how energy markets work. Crude oil is bought and sold by thousands of oil traders in the world market. The prices they bid are based on factors such as supply, demand and speculation. Contrary to her attempts to vilify “Big Oil”, five companies do not make up and control the oil industry.

Stabenow suggested that alternatives be developed to combat high fuel prices, but this isn’t anything new. The federal government has given away billions of dollars over several decades to fund research into alternative fuels. The results have not been promising. Ethanol has received subsidies for 30 years and only makes up 3% of the U.S. market. Without federal aid, the ethanol market would collapse. The big buzz today revolves around E85. Unfortunately, this latest fad receives 51 cents per gallon in federal tax assistance, costs about the same as regular gas, and delivers fewer miles per gallon. Even the most popular alternative to date – hybrids – fails to recoup their higher costs in fuel savings.

Certainly a successful alternative would be welcome. However, does anyone really believe Congress can come up with one? After all, we are talking about a group that promotes policies that have effectively eliminated competition in health care and education.

My suggestion to the busybodies in Congress is to let the free market reduce the price of gas. The best fix for high gas prices is high gas prices. Those “outrageous” profits attract two things. First, they attract investments to expand production and refining capacity. This increases supply and lowers prices. Second, they attract entrepreneurs seeking riches. The people who develop a legitimate alternative to gasoline stand to make billions, perhaps trillions, of dollars. The chance for such a lucrative prize will drive the search for a successful alternative better than the misguided and politicized tax incentives promoted by Stabenow.

[Letter to the Editor - Farmington Observer. Published 08/17/2006.]