Political windfall
Toolbox
Published: June 12, 2008
The fury now being directed at the oil companies is the direct result of the high cost of fuel and the all too real hardship the cost creates. But if our political leaders do not see beyond the need to lower fuel prices, then the fury they expend will be for naught.
The Energy Department estimated this week that motorists can expect gasoline prices to stay in the vicinity of $4 a gallon through next year, despite reduced demand caused by high prices. Meanwhile, Congress has been debating ways to address the problem, with each party trying to pin the blame on the other for skyrocketing prices.
This week Democrats pushed a bill that would have imposed a windfall profits tax on oil companies, rescinded some oil company tax breaks and financed tax incentives for alternative energy. But Republican opposition halted the bill's progress.
In one sign of the extraordinary volatility of the fuel price issue, Gov. James Douglas issued a statement endorsing the Democratic bill, which has the strong support of Vermont's congressional delegation.
"I'm pleased Congress is beginning to consider action that could potentially provide Vermonters with relief from skyrocketing oil and gasoline prices," he said.
Congressional Republicans argue that by taking away oil company tax breaks and taxing excessive profits, Congress would actually be forcing fuel prices even higher. They, like the Democrats, are acting as if the main issue is the high price, and each side hopes to win votes by tarring its opponent with the blame.
But the high price is only a symptom of a larger problem, which is that the economy is wedded to a fuel source whose price is affected by forces beyond the control of everyone. The high price seems to have mystified the experts, but the commonly cited causes are increased demand from China, India and other developing nations; the volatility of the Middle East; speculation on Wall Street; and the declining dollar.
Certainly, the oil companies, which are raking in billions in profits, represent a plausible source of revenue, not for the purpose of lowering prices or punishing the companies, but because revenue is necessary to enact the programs needed to make the changes necessary for weaning the nation from oil.
Columnist Thomas Friedman argued two years ago that if the price of gasoline were driven up to $4 a gallon by means of a carbon tax, that would be a good thing.
The high price would cause us to use less, and the revenue from the tax could be used to fund a Manhattan Project-type program to move us toward new technology and new fuels.
Instead, we have $4-a-gallon gasoline, and the extra money we are paying is fattening the wallets of Arab sheiks, and the public has nothing to show for it except depleted bank accounts.
Taxing the oil companies to finance a shift to an oil-free economy ought to be the aim of policymakers, even if it leads to higher gas prices. Demanding lower gasoline prices and blaming the opposition for high prices is the more likely political strategy.
Gov. Douglas, always sensitive to the mood of the electorate, is keen enough to understand that voters are ready to punish someone for the fuel situation. He would rather that it would be Republicans in Congress than, say, Republicans in Montpelier.
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