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Obama Not Even Trying to Reduce Energy Prices

Posted By Conn Carroll On August 4, 2008 @ 12:07 pm In Energy | Comments Disabled

On June 10, when CNBC’s John Harwood asked if high energy costs were good for America, Barack Obama replied: “I think that I would have preferred a gradual adjustment [1].”

Obama did not say it directly, but the logical conclusion from his statement is that Obama does not believe the government should pursue policies that reduce the price Americans pay for energy. The “emergency plan [2]” Obama released Friday [3] is entirely consistent with Obama’s pro-high-energy-cost position. Nothing in the plan even attempts to lower energy costs. All it does is promise checks — $500 checks for individuals and $1,000 for married couples — for “middle-class families.”

Obama says he will pay for the giveaway with a “windfall profits” tax on oil companies. Obama’s plan does not specify at exactly what point profits become windfall. The Wall Street Journal asks [4]:

Exxon’s profit margin stood at 10% for 2007, which is hardly out of line with the oil and gas industry average of 8.3%, or the 8.9% for U.S. manufacturing (excluding the sputtering auto makers). … If that’s what constitutes windfall profits, most of corporate America would qualify. Take aerospace or machinery — both 8.2% in 2007. Chemicals had an average margin of 12.7%. Computers: 13.7%. Electronics and appliances: 14.5%. Pharmaceuticals (18.4%) and beverages and tobacco (19.1%) round out the Census Bureau’s industry rankings. … Or consider Google, which earned a mere $4.2 billion but at a whopping 25.3% margin. Google earns far more from each of its sales dollars than does Exxon, but why doesn’t Mr. Obama consider its advertising-search windfall worthy of special taxation?

But even if we figured out at exactly what point oil company profits became “windfall,” Obama’s plan is still self-defeating because it does nothing to lower energy prices … instead it will raise them. George Mason economics professor Don Boudreaux writes [5]:

Barack Obama proposes to deal with rising gasoline prices by giving a $1,000 “emergency rebate” to consumers — a rebate to be paid for by taxing the so-called “windfall profits” of oil producers … In other words, a critical part of Sen. Obama’s strategy for reigning in high gasoline prices is to subsidize gasoline consumption and more heavily tax its production. This plan – which increases the demand for gasoline and reduces its supply — makes as much sense as trying to put out a fire by dowsing it with jet fuel.


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URL to article: http://blog.heritage.org/2008/08/04/obama-not-even-trying-to-reduce-energy-prices/

URLs in this post:

[1] I think that I would have preferred a gradual adjustment: http://thepage.time.com/mccain-camp-release-on-obama-and-gas-prices-2/

[2] emergency plan: http://obama.3cdn.net/0035b25f3b7e0a7fe3_w0kdmvrq8.pdf

[3] released Friday: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/08/02/MNAB123KH9.DTL&hw=obama+emergency+rebate&sn=002&sc=313

[4] asks: http://online.wsj.com/article/SB121780636275808495.html?mod=opinion_main_review_and_outlooks

[5] writes: http://cafehayek.typepad.com/hayek/2008/08/obamanomics.html

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