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)