AP factchecks Dems on oil

posted at 11:50 am on May 12, 2008 by Ed Morrissey

The Democrats have decided to devote a large part of their strategy this cycle to demonizing oil companies as a way to argue for greater government intervention in energy markets. They point to record profits — in gross dollars — and demand higher taxes in order to beat the oil companies into submission. The Associated Press runs down their arguments and finds them … well, let’s just say factually deficient:

As millions of people approach the summer vacation season under the threat of $4-per-gallon gasoline, Congress is scrambling to respond. But don’t wait for anything that will drive down prices at the pump.

A Senate vote on a GOP plan is scheduled for Tuesday, and Senate Majority Leader Harry Reid has promised to bring up a Democratic package before the Memorial Day congressional recess. Except for halting the flow of oil into the government’s Strategic Petroleum Reserve, neither plan is likely to go very far. Both will be challenged by filibusters by opponents, meaning they would require 60 votes to advance.

In fact, the entire rationale used by Democrats for their policy platform disappears under even modest scrutiny, as the AP discovers. The underlying reasoning for hostile, intrusive action against the producers comes from the assumption that they have generated obscene profits at the expense of consumers. In fact, the AP misses entirely the relatively low profit margin for the industry (8.3%) but does note the idiocy of attempting to lower prices by hiking taxes:

FACT: Profits are large because the companies are huge, and oil now sells for well over $120 a barrel. The taxes could spur some new alternative energy projects, but economists say they also could reduce investments in oil and gas exploration, and are unlikely to affect prices. They could do more harm than good, says Robert Hansen, senior associate dean at Dartmouth’s Tuck School of Business. “Anytime you put in a tax you create an incentive to avoid it,” says Hansen.

The other genius ideas have the same eventual outcome:

  • Enact price-gouging rules — This would make sense if anyone had ever discovered any evidence of systemic price-gouging. States already have these regulations to address individual cases of gouging during supply crises, but passing overarching federal legislation could make these spot shortages even worse. If prices go up sharply in response to supply shortages, some companies might curtail sales to avoid prosecution until they can provide gasoline at a lower price.
  • Dismantle OPEC — A Hillary Clinton favorite; she wants to pass a law that would make OPEC illegal. Maybe we can declare radical Islamism illegal as well, which would have the same effect. All it would do is provoke OPEC members into ending sales to the US, which would drive up prices and create a series of retaliatory trade actions.

The AP doesn’t like the Republican proposals much more, but for different reasons. Converting coal to diesel eats up more energy than it’s worth, while doing nothing to reduce pollutants. They don’t like the ANWR production idea because OPEC could simply reduce its production to compensate, but it would still keep more of our use under our control. They don’t even bother to rebut the idea of offshore drilling making an impact on our supply, but simply note that Congress hasn’t yet passed a measure that would allow individual states to opt out of the federal ban.

Bottom line: if we want lower gas prices, we’d better start producing our own oil in greater quantity, as well as refining it ourselves. Adding costs and regulation will only drive prices higher, and gets us no closer to energy independence. If we plan on using oil, we should stop insisting that the rest of the world pumps theirs for our use. (via Big Lizards)


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Im starting to wonder about the news media “Debunking” democrats. I swear I see a pattern of “attacking to give the candidates information to use as a sheild later”.

Take for example the “Joohn McCain was born outside the USA”. The NY Times push that hard right away.

Now questions are arsiing about obama living outside the US. Makes me wonder if the earlier McCain attack was a warning shot for Obama ?

And stuff like this. Is the AP attacking the dems or warning them that they need to adjust their position ? This is a good protection attack because its such a esoterical argument in the first place.

Really wonder what the MSM is up to any more.

William Amos on May 12, 2008 at 11:56 AM

A mild criticism of Democrats and something of value from Dartmouth- all in the same AP article?

Who’da thunk it?

drjohn on May 12, 2008 at 11:56 AM

What am I missing? Drill for more oil, build refineries, sounds kind of simple to me.

right2bright on May 12, 2008 at 11:57 AM

Bottom line: if we want lower gas prices, we’d better start producing our own oil in greater quantity, as well as refining it ourselves. Adding costs and regulation will only drive prices higher, and gets us no closer to energy independence. If we plan on using oil, we should stop insisting that the rest of the world pumps theirs for our use. (via Big Lizards)

AMEN!

kcd on May 12, 2008 at 11:58 AM

Unfortunately the “evil giant corporation gouging you for their enjoyment” meme plays well with large swaths of the public. Hopefully people realize that the way to lower costs is not to increase taxes on the producers, but to increase supply. A novel concept, I know.

brak on May 12, 2008 at 12:12 PM

Reality and Democratic energy policy ideas collide

Fixed.

NoFanofLibs on May 12, 2008 at 12:13 PM

“… the AP misses entirely the relatively low profit margin for the industry …”

You’d think somebody at the A.P. would understand profit margins, I mean, they are a business, right? Can’t they check with Earl downstairs in the bean counter’s office?

Bottom line: if we want lower gas prices, we’d better start producing our own oil in greater quantity, as well as refining it ourselves.

Putting more patrol boats in the Persian Gulf to protect oil tankers wouldn’t hurt either. Everytime a terrorist attacks a ship, the price of oil goes up a penny.

Tony737 on May 12, 2008 at 12:14 PM

Drill for more oil, build refineries, sounds kind of simple to me.

right2bright on May 12, 2008 at 11:57 AM

It sounds evil to those who wish to eradicate capitalism. Equality, not liberty, is the holy grail of the left. Capitalism, in their view, exploits resources unfairly, suppresses the working class, and enriches American to the Detriment of the Universe!

This is not about energy or the environment. It’s about political power and control.

RushBaby on May 12, 2008 at 12:15 PM

Do they still teach supply and demand economics in our liberal academia, or have they abandoned this curriculum altogether because it just gets in the way of their Marxist ideology?

fogw on May 12, 2008 at 12:16 PM

Hopefully people realize that the way to lower costs is not to increase taxes on the producers, but to increase supply. A novel concept, I know. – brak

Oh. My. Gawd! What planet are you from? Don’t you know that we have to punish the eeeeevil corporations in order to protect the Little Guy? Ya know, you’ll never make Commissar with that attitude, mister!

Tony737 on May 12, 2008 at 12:18 PM

Now questions are arsiing about obama living outside the US. Makes me wonder if the earlier McCain attack was a warning shot for Obama ?

what?

Kaptain Amerika on May 12, 2008 at 12:20 PM

we just need to start producing our own

ConservativePartyNow on May 12, 2008 at 12:23 PM

The real story that AP misses is that the Democrats are attacking oil companies to cover up the cost of their environmental policies. The Democrats and some Republicans like John McCain are heavily invested in the global warming meme and seek to raise the cost of conventional energy. However, they also need a way of diverting the public from the true cause of pain at the pump.

During the first “oil crisis” the Democrats were talking nationalization. Today, just taxes. Nationalizing the oil industry would put them on the spot to actually deliver lower prices. Public ownership is not compatible with their true intentions.

I will give ALgore half a cheer because he has been true to his beliefs and has not joined the rest of his party on this issue.

jerryofva on May 12, 2008 at 12:23 PM

anyway… I from Oklahoma, we stopped drilling and pumping oil long ago, and our economy crashed locally, that’s the reason I live in Missouri now. now when I visit the reservation, I see oil wells running again, and in Kansas too… it’s coming my friends, that sweet black nectar is coming again… I often wonder why the Dems, who love mother earth soooo much, don’t love oil? mother nature’s incredible power source. I mean we really take “man-made” too far. nothing is man made really, it’s just taken from nature and reconstituted. it may be bad for us or an animal or fish, but in the end mother nature would absorb all that damage. we might be long gone by then but she would survive and thrive again.

Kaptain Amerika on May 12, 2008 at 12:26 PM

Ship of state! Mayday! Mayday! No one is at the wheel.

ronsfi on May 12, 2008 at 12:27 PM

what?

Kaptain Amerika on May 12, 2008 at 12:20 PM

In other words what better way to defuse any complaints about Obama having lived outside the US than attack McCain for the same thing. McCain has to defend the charge and it allows Obama to use McCain’s own argument to defuse questions about him.

I get the same kinda vibe from this AP story. Why point out flaws in the Democrats plan other than to give them ammo to defuse critisim ?

William Amos on May 12, 2008 at 12:30 PM

Converting coal to diesel eats up more energy than it’s worth, while doing nothing to reduce pollutants.

That’s not true of this process:

Part of the problem with the F-T process is that it produces a mixture of hydrocarbons — many of which are not useful as fuel. But in the recent research, Alan Goldman, professor of chemistry and chemical biology at Rutgers University, and Maurice Brookhart, professor of chemistry at the University of North Carolina at Chapel Hill, use catalysts to convert these undesirable hydrocarbons into diesel. The catalysts work by rearranging the carbon atoms, transforming six-carbon atom hydrocarbons, for example, into two- and ten-carbon atom hydrocarbons. The ten-carbon version can power diesel engines. The first catalyst removes hydrogen atoms, which allows the second catalyst to rearrange the carbon atoms. Then the first catalyst restores the hydrogen, to form fuel.

Diesel fuel produced in this way has several potential advantages. Ordinary diesel contains molecules, called aromatics, that, when combusted, produce particulates, Goldman says. But the diesel formed by the new catalysts does not include aromatics, so it burns much cleaner, overcoming one of the major objections to diesel fuel. This could lead to more vehicles using diesel engines, which are about 30 percent more efficient than gasoline engines.

http://www.technologyreview.com/read_article.aspx?id=16713&a=f

mred on May 12, 2008 at 12:31 PM

Please, oh grat Allah in the sky, let Bush and the Republicans come out and slam the democrats and push for more drilling and more refining on our own soils.

/ridiculous notions.

SouthernGent on May 12, 2008 at 12:31 PM

Bottom line: if we want lower gas prices, we’d better start producing our own oil in greater quantity, as well as refining it ourselves. Adding costs and regulation will only drive prices higher, and gets us no closer to energy independence. If we plan on using oil, we should stop insisting that the rest of the world pumps theirs for our use.

But from a certain perspective, that’s the better way isn’t it? I mean, we’ve been sucking OPEC dry for the last, what, 60 years or something? What we really need is to loosen up regulation for getting oil from tar shales.

Maybe we can sell anti-tar shale regulation as something “Big Oil” wants, to ensure their “huge profits”, and get the lefties to deregulate it for us.

apollyonbob on May 12, 2008 at 12:33 PM

Yes, tax it all, and if that doesn’t work, tax it some more. Keep taxing until the problem is fixed. Afterall, it’s all about fighting for the middle class little guy. It doesn’t matter that many of these middle class “little guys” are employed at these big bad companies that the government wants to tax the hell out of and regulate, where their jobs may be affected.

Rick on May 12, 2008 at 12:35 PM

Man we did this at Newsbusters on April 13th and Factcheck.org did it even earlier. Where the heck has the AP been??

Warner Todd Huston on May 12, 2008 at 12:37 PM

Bottom line: if we want lower gas prices, we’d better start producing our own oil in greater quantity, as well as refining it ourselves. Adding costs and regulation will only drive prices higher, and gets us no closer to energy independence.

Yes. Production is good for the economy, not to mention national security. Ecology does not equate to forfeiture.

Hardy-har-har at the liars and fools who believe them.
The first Earth Day Coalition of Pseudo-Scientists PROMISED that the entire earth would run out of crude oil reserves by 2000. That prediction did not even consider the increased market for oil demanded from China as it was not yet granted “Favored Nation” status by Nixon. We’re talking Ghandi and Mao times, at THAT rate, the earth would be completely depleted of oil BEFORE GWB POTUS.

maverick muse on May 12, 2008 at 12:41 PM

Who says Dems don’t have a solution by raising taxes? When the economy tanks, nobody’s going to buy and consume, therefore, no production of anything. Prices are bound to drop (after a while).

Pelosi/Reid: ‘Problem, what problem? Do you see a problem?’

Sir Napsalot on May 12, 2008 at 12:49 PM

US oil companies should consider cutting out the traders and do their own trading electronically/internet, their own PR and increased profits. Cut out the middlemen Wall Street pirates–cut them down to size, the damned pencil pushing do nothing leeches, infested bureaucratic boils on the ass of capitalism. There is no clear and present danger of an oil shortage. The high prices that we are paying are not because of the oil companies, but the result of middlemen determining to push the price beyond the limit set by SUPPLY AND DEMAND. Before you know it, WALL STREET will require the government to bail out every investment company when the price of oil settles to where supply and demand naturally place it. “The prices dropped below what our speculative manipulation set!”

Don’t choke on the oil company gnat and swallow the traders’ camel.

maverick muse on May 12, 2008 at 12:59 PM

A mild criticism of Democrats and something of value from Dartmouth- all in the same AP article?

Who’da thunk it?

drjohn on May 12, 2008 at 11:56 AM

I’m guessing an editor unwittingly assigned the story, without realizing that there was no way to write it without making the Dems look … well, stupid. Even the obligatory dash to a Tuck School lefty economist couldn’t get them what they needed.

Can’t believe the story made it to press.

Jaibones on May 12, 2008 at 1:02 PM

I remember the long lines at gas station in the 1970’s. Democrats were telling us we were out of oil but it turned out to be just another enormous fraud on the American people. This is how President Reagan ended that “oil crisis” on the same day he took office.

On January 28, one week after we [Reagan Administration] began operations, the President ordered the complete deregulation of petroleum prices, which had been under federal controls for a decade. On the following day, he signed an order eliminating all activities of the Council on Wage and Price Stability—abolishing virtually all vestiges of the federal price controls which had distorted supply and demand in the 1970s and led to ruinous shortages for the country. (Natural gas, under different legislation, was still subject to controls.) The thrust of these actions was both obvious and consistent with the President’s pledges—to free the economy from excessive regulation. The reaction from the Washington establishment was prompt, and loud. Sen. Howard Metzenbaum (D-Ohio) denounced the deregulation of petroleum prices, saying it would raise the price of gasoline to $2 a gallon. The real effect, of course, was just the opposite. Renewed production under decontrol broke the back of the OPEC cartel and drove prices down (they were actually lower in 1991 than a decade earlier). With this stroke of the pen, the President ended the “energy crisis” of the 1970s.

Edwin Meese, Counsellor to the the President, 1981-1985
Attorney General, 1985-1989 From his book: “With Reagan”
page 75

Now consider this, we are currently sitting on the HIGHEST accumulation of known oil reserves in history, yet we have the highest price for oil in history. Something has distorted the relationship of supply and demand.

If we have more oil than we have ever had before, and we do, then oil prices SHOULD be at an all time low, not an all time high. Clearly, current oil prices are artificially high for whatever reason. What’s causing it?

We all know that futures trading can and does in some instances distort market pricing. But futures trading is regulated… right? So that can’t happen… right?

But it seems there is a “backdoor” to futures trading that is completely unregulated. I didn’t know this myself until I read the article linked below. The writer, F. William Engdahl just might have the reason why we are awash in oil but still paying through the nose for it.

But to believe Engdahl’s theory, you would have to believe our government watchdogs have failed us again. But how hard is that to believe?

In the 1970’s the Democrats pushed the price of oil through the roof with over regulation, could it be that this time they have accomplished the same thing by neglecting to regulate a part of the futures market?

I don’t know, but take a look this, it’s worth a read.

The article is long so let me give you one of it’s most salient points, which is that oil prices began to increase dramatically shortly after this loophole for “futures” trading was opened.

A glance at the price for Brent and WTI futures prices since January 2006 indicates the remarkable correlation between skyrocketing oil prices and the unregulated trade in ICE oil futures in US markets. Keep in mind that ICE Futures in London is owned and controlled by a USA company based in Atlanta Georgia.

In January 2006 when the CFTC allowed the ICE Futures the gaping exception, oil prices were trading in the range of $59-60 a barrel. Today some two years later we see prices tapping $120 and trend upwards. This is not an OPEC problem, it is a US Government regulatory problem of malign neglect.

By not requiring the ICE to file daily reports of large trades of energy commodities, it is not able to detect and deter price manipulation. As the Senate report noted, “The CFTC’s ability to detect and deter energy price manipulation is suffering from critical information gaps, because traders on OTC electronic exchanges and the London ICE Futures are currently exempt from CFTC reporting requirements. Large trader reporting is also essential to analyze the effect of speculation on energy prices.”

F. William Engdahl – 3 May 2008

Maxx on May 12, 2008 at 1:10 PM

But from a certain perspective, that’s the better way isn’t it? I mean, we’ve been sucking OPEC dry for the last, what, 60 years or something?

apollyonbob on May 12, 2008 at 12:33 PM

Looking at it that way, we can have the last laugh when OPEC has no more oil and we’ve got it all.

Of course, none of us will still be alive by that time.

James on May 12, 2008 at 1:38 PM

Bottom line: if we want lower gas prices, we’d better start producing our own oil in greater quantity, as well as refining it ourselves.

Or, we could work to reduce demand. We need some kind of Manhattan project to develop an automobile that is every bit as capable as a gasoline-powered car and can be brought to market at a similar price point but does not run on gasoline or any oil product. I’m thinking hydrogen fuel cell or something like that. I know GM has been toying with these things for years, so something is preventing their introduction. If even 20% of US drivers switched to a non-oil consuming vehicle, that would send the price into a tailspin.

Maxx on May 12, 2008 at 1:10 PM

Don’t forget also that demand is up since the Iron Curtain fell and China switched to Capitalism.

Kafir on May 12, 2008 at 1:51 PM

Speaking of fact checks this is by an African American Rev, who says the Black Leadership owes Don Imus an Apology. Really! No one is mentioning Obama’s lack of conviction on issues that really count.

http://www.renewamerica.us/columns/childress/080510

Dr Evil on May 12, 2008 at 1:56 PM

We need to give the Democrat lead Congress time to accomplish their promise to lower gas prices. They may have promised lower gas prices, but they did not give a time certain for meeting those expectations. Patience is needed on this very difficult challenge. I like how the libs always say we need to reduce our dependence on imported oil. They might as well say we need to reduce our dependence on oil period. The GOP needs to push back on these jackasses. How about we drill for our own oil, refine our oil into our own gasoline, stop these asenine fuel blends, build nuclear power plants, and spend our time developing cleaner ways to burn coal. We have our own resources, and they need to be developed. Now! Not years down the road. Now. The sad thing is that we do not have the leadership in Washington, DC to accomplish these simple solutions. Instead we are stuck with demonizing the evil oil companies, pushing for solar energy, wind energy, and corn ethanol to rescue our energy crisis. That is a recipe for disaster for the American people. I read the other day that ANWR would be up and running right now. Producing barrels of oil, and helping with supply and demand. I often wonder if the libs would have taking more economics classes, instead of liberal arts, they may have a better understanding of how to combat economic issues. All they seem to understand is more taxes, and regulation. Of course until the GOP has the courage to point out these idiotic principles that the libs pursue, the people will never get the truth. I am not holding my breath while I wait.

chief on May 12, 2008 at 2:00 PM

Today’s Big Oil is equivalent to the 80s/90s Big Tobacco companies. EVIL, you know.

I have often wondered at these Greenies/Do Gooders. Why don’t they use their creativities, passions and energy on the drug wars/warlords? Just have ads telling kids/adults “Don’t Do Drugs” did absolutely nothing.

Sir Napsalot on May 12, 2008 at 2:02 PM

I often wonder if the libs would have taking more economics classes, instead of liberal arts, they may have a better understanding of how to combat economic issues.

chief on May 12, 2008 at 2:00 PM

We let the Democrats off too easy when we call them dumb. Their plan is to drive America into socialism and their plan is working beautifully.

Maxx on May 12, 2008 at 2:11 PM

The left has been very good at telling America what not to do… what exactly do they suggest we do to remove ourselves from foreign oil?

cannonball on May 12, 2008 at 2:17 PM

We need to open the continental shelves off Florida and California to drilling, and open up Federal land in Colorado, Utah, and Wyoming to development of shale oil.

There’s a huge deposit of shale oil there, but people are wary of shale oil because efforts to extract it in the 1970′s went bust after the price came down in the 1980′s. It’s estimated that shale oil costs about $60/barrel to extract these days, but oil companies could definitely turn a profit with foreign oil at $120/barrel.

Trouble is, most of the area is Federal land, which President Clinton put off-limits with an Executive Order. Since President Bush is blamed by the mainstream media anyway as being in cahoots with the oil indrustry, why not undo Clinton’s Executive Order and bring down the price of oil, for which many drivers will be very grateful?

Oh yeah, those eeeeeeevil oil companies will make money, but so will American workers in the Rockies, instead of using oil money to fund madrassas that teach young boys to blow up Americans for Allah.

Steve Z on May 12, 2008 at 2:22 PM

I am so tired of idiot politicians ruining our lives and our country. Vote for anybody who is not an incumbent.

ultracon on May 12, 2008 at 2:46 PM

And McCain is a blithering idiot as well. God help us and God Save America!! No one else will.

ultracon on May 12, 2008 at 2:48 PM

somewhat….. he isn’t going to sponsor some windfall profits tax moronic idea. Although his insistence on restrictions on drilling shows he also is an idiot.

ultracon on May 12, 2008 at 2:55 PM

Everybody completely misses the point on a barrel of oil. Last I checked, only twenty-odd gallons of a 55 gallon barrel goes to fuels, gas and diesel. The rest goes to manufacturing lubricants for industry and the combines that harvest wheat, food processing, medicines, makeup, plastics, paint, you name it. The demand for that from India, China, etc. contributes more than the demand for gasoline. It’s not SUV’s that cause the price of oil to skyrocket, it’s everything else. Overlooked by all media, all pundits, etc, etc, etc. Now THAT is reality. Windfall profits tax…. my aching butt.

ultracon on May 12, 2008 at 3:01 PM

Another big problem is those states affected by NIMBY (not in my back yard)syndrome. Fla and Cali won’t drill off their shores, yet they expect to pay the same price as those states that are willing to deal with the headaches that comes from production and refining of oil. My federalist views say we shouldn’t force them to open drilling areas, but there can be financial pressures that may convince them to do so.

Corsair on May 12, 2008 at 3:12 PM

AP is screwed, don’t try to pin facts onto a liberal, that’s what conservatives do.

right2bright on May 12, 2008 at 4:28 PM

ultracon on May 12, 2008 at 3:01 PM

Your percentages hold true for what they are producing now. If they increase oil by 20%, that doesn’t mean they produce “lubricants” by 20%. That just happens to be the percentages now.
Over 80% of a gallon of oil (over 40 gallons out of a 55 gallaon barrel) can be directly converted to diesel, if we had a new diesel refinery plant in the U.S.
If congress said they agreed to aggressively drill in ANWR, and fast trac the opening of two refineries in the U.S., the price of oil, diesel, gasoline, would drop in half overnight…plus the added benefit of a few speculators jumping out of their penthouses.

right2bright on May 12, 2008 at 4:37 PM

Until we start drilling for the oil and gas we have HERE, all this talk is total B.S.

rtsidedragon on May 12, 2008 at 4:49 PM

While we’re talking about taxing the evil oil companies. take a look at this…

http://online.wsj.com/article/SB121055427930584069.html?mod=opinion_main_review_and_outlooks

So we tax oil companies, but heavily subsidize solar and wind to the point of $23.00+ per mega watt hour (or 2.3 cents per kwh.

“The wind and solar lobbies are currently moaning that they don’t get their fair share of the subsidy pie. They also argue that subsidies per unit of energy are always higher at an early stage of development, before innovation makes large-scale production possible. But wind and solar have been on the subsidy take for years, and they still account for less than 1% of total net electricity generation. Would it make any difference if the federal subsidy for wind were $50 per megawatt hour, or even $100? Almost certainly not without a technological breakthrough.

By contrast, nuclear power provides 20% of U.S. base electricity production, yet it is subsidized about 15 times less than wind. We prefer an energy policy that lets markets determine which energy source dominates. But if you believe in subsidies, then nuclear power gets a lot more power for the buck than other “alternatives.”

The same study also looked at federal subsidies for non-electrical energy production, such as for fuel. It found that ethanol and biofuels receive $5.72 per British thermal unit of energy produced. That compares to $2.82 for solar and $1.35 for refined coal, but only three cents per BTU for natural gas and other petroleum liquids.

All of this shows that there is a reason fossil fuels continue to dominate American energy production: They are extremely cost-effective. That’s a reality to keep in mind the next time you hear a politician talk about creating millions of “green jobs.” Those jobs won’t come cheap, and you’ll be paying for them.”

Dr. Bob on May 12, 2008 at 8:36 PM