If Barack Obama hoped to ride a new wave of energy from his speech yesterday in Lansing, the Detroit News tells Obama that he hit a dry hole. Scoffing at his populist attack on oil companies, the editorial board compared his energy policy to those of Richard Nixon and Jimmy Carter, which they didn’t mean as a compliment. They wonder where he plans to actually get more supply — a subject Obama avoided:
Draining the [Strategic Petroleum Reserve] would drop consumer fuel costs for the short run, as would any sudden increase in supply. But then what? Once the reserves are gone, prices would go back up, and perhaps even higher because the reserves ultimately would have to be replaced.
Oddly, although Obama’s proposal shows he recognizes the impact of supply on prices, he remains hesitant about lifting the congressional ban on off-shore drilling. Credit Obama for moving slightly away from the hard-line no drilling position of the Democratic congressional leadership by saying he’d consider “limited” coastal drilling if it were packaged with big increases in government subsidies for alternative energy development.
But at the same time, he proposed taking away any incentive oil companies would have to expand drilling and increase supplies by pushing a windfall tax on Big Oil’s profits to fund the $1,000 rebate checks.
Perhaps the senator is hoping the checks will make Americans forget, as he apparently has, about what happened when Presidents Nixon, Ford and Carter played the price and profit limiting game the 1970s.
What happened? The government put disincentives on drilling and exploration in the form of higher taxes, because the eeeeeeeevil oil companies made too much profit. Just as now, instead of limiting the profit, it forced the oil companies to keep their profits instead of investing in new supply. Prices went up rapidly as demand outstripped the artificially limited supply, and oil companies made even more profit which they couldn’t put back into supply.
This rapid expansion of profit created an opportunity for Jimmy Carter to demonize the oil industry and get the disastrous windfall-profits tax passed. What did this do? It provided even more disincentives to American oil companies, but opened the door for the state-owned foreign companies to sell their own product at an advantage. It made the US even more dependent on foreign oil than ever, which is exactly what will happen when Obama re-enacts the Carter Era as President (and not just on oil policy, either).
The News addresses one point that has been mostly overlooked by the media in their coverage of the energy-policy debate. If we aren’t facing a supply crisis, as the Democrats insist by saying we can’t drill our way out of this, why release oil from the SPR? Doesn’t that in fact acknowledge that we need more supply on the market in order to lower gas prices — and shouldn’t we work to start building long-term plans to ensure good supply for the future?
Don’t expect any sensible conclusions from Obama, though. As the News notes, he’s selling the same populist pap we were fed in the 70’s about the eeeeeevil oil companies and the need to punish them for doing exactly what they’re supposed to do.