Let’s send the lousy ones packing

By Dick Tunison

Having followed the national news this past week and focusing on statements and proposals coming from our senators and representatives, I do believe I’ve hit upon a solution to all our problems. Yes, it’s drastic and it’ll be hard to swallow for some, but I think it’s a brilliant idea. First, I need to give you a frame of reference.

Referring to the high gas prices, Sen. Charles Schumer (D-NY) declared the need for a congressional investigation into oil industry price gouging. Never mind more than thirty such investigations have been conducted in the past with no evidence anybody in the industry is involved in gouging. What stupidity! Then on the same issue, Senate Majority Leader Bill Frist (R-TN) and House Speaker Dennis Hastert (R-IL) made a similar proposal early this week. Not to be left out, the President joined the pack on Tuesday. It seems as if a whole slug of politicians is once again “stuck on stupid.”

Having some experience in the oil industry, I know that the “major” I worked for bent over backwards in its effort to play the game clean. Our Law Department constantly reminded us to avoid even the appearance of doing anything that was illegal or that might draw negative public scrutiny. Although there was no inhibition to taking strong competitive positions in the market place, that certainly wasn’t authorization to increase prices to the detriment of the consumers. Think about it, in a competitive market, who raises prices in order to compete?

If the idea of pursuing supposed price gouging doesn’t gain traction with the public, the alternative seems to be to attack the oil companies for exorbitant profit taking. The fact that ExxonMobil reported a profit in excess of $8 billion during the first quarter has other politicians and, I might add, John Q Public in a tailspin. Yes, that amount of profit is the greatest in history for a single company, but it doesn’t tell the whole story. Who was concerned about Big Oil six years ago when crude prices tanked? The fact that oil industry profit margins were exceeded by several industrial groups seems not to matter. After all, we’re not looking at the Financial Services sector or technologies as villains. Right now we all hate Big Oil.

Another wild eyed proposal is an excess profit tax in which case the Government would become the gougers by reaping the benefits of high dollar taxes. Such a move would put a damper on profit incentives and just might be passed along to consumers by the oil companies through an increase in the price of product. An excess profit tax is not a new idea, but our experience with it has apparently taught few lessons.

EPTs were established by congress during the First and Second World Wars and the Korean War for example. In some cases, taxes were levied against profits, over an established level, as high as 90%. This often meant that companies had insufficient profit margins to allow them to repair and replace equipment that was wearing out. One only needed to look at the post war burgeoning steel industries of Japan and Germany to see how those nations cleaned our clock with their new-technology replacement mills that were quickly put into competition with our own antiquated industry.

Another screwball proposal that just bubbled to the surface is that the government might give consumers $100 to compensate for higher gas prices. I haven’t heard who the beneficiaries would be, perhaps everyone with a car or truck, or $100 per family. But this is a wonderful proposal for the beer industry that would likely reap the greatest benefit from higher sales for at least a month or two.

Come on folks, let’s get real. A recent financial report published by ConnocoPhillips shows that third quarter 2005 earnings from its US refining and marketing operations amounted to 9 cents per gallon. I am quick to point out that the total federal, state and local taxes on that same gallon of gas amounted to about 42 cents per gallon across the nation. So who is the gouger?

The ConnocoPhillips report stated that 58% of the cost of a gallon of gas at the pump was due to the cost of the crude oil used to make the gasoline. We’ve been told that more than half of the crude oil necessary to sustain the American Market is imported. So we shouldn’t look to domestic oil companies as manipulators of the price of crude. If anything they are the followers rather than the leaders in the push to increase crude prices.

The industry is still prevented from drilling in ANWAR and along the coasts regardless of the fact Cuba has given permission to the Chinese and Canadians to do so in the middle of the Gulf of Mexico. We’ve been put in a position of having our own resource base restricted while everyone complains about the price of gas. Most of the areas where expanded oil production could be expected are out of sight of the human eye. Yet the environmentalists and some of the screwier politicians froth at the mouth when opening ANWAR is proposed. They can’t even approve test drilling on a tiny area of the Arctic National Wildlife Refuge notwithstanding the fact that the US Geological Survey estimates the area contains enough oil to increase our nation’s proven reserves by 50%.

A viewer of the John Gibson Show on Fox News sent an email this week that asked why we were complaining about $3 per gallon gas when he was paying $7 per gallon in Turkey. That’s a good question. Our Politicians and special interest groups have had a role in this fiasco, and they find all sorts of reasons not to admit it.

A number of politicians are crying for more ethanol production, even though the mid-continent states are currently producing at a near maximum level. One reason is that politicians reap millions of dollars in “donations” from ethanol producers. This leverage money is seldom talked about, but it helps keep politicians and environmentalists from choking when they talk about the benefits of ethanol blended gasoline. Each gallon of ethanol contains about two-thirds as much energy as does gasoline, resulting in reduced fuel economy. One would expect vehicles using gasohol to show about a 3.3 percent reduction in miles per gallon since ethanol constitutes 10 percent of the ethanol-gasoline blend. In a recent report on the performance of alcohol-gasoline blends, the DOE concluded that gasohol-fueled vehicles averaged 4.7 percent fewer miles per gallon than gasoline-fueled vehicles in automobile fleets. I’ll bet you didn’t know that, did you?

Economics 101 has taught us that as demand increases so does price. So, if the demand for ethanol increases as a result of political interference, the price will go up as well. If that occurs, the increased demand for corn, the principle source of ethanol, will increase the cost of beef, pork and poultry products. And the subsidies will likely continue and the gratuities handed out to lawmakers will certainly be accepted gratefully.

I could go on about other foibles on the part of our politicians. Just consider some of the wasteful actions surrounding the Katrina clean-up, or congress’ continuing inability to unravel the immigration difficulties we face, even though they’ve had years to do the job. Remember the hullabaloo over “selling our ports” to foreign companies?

Well, finally, on to my great idea. We should require that all senators and congressmen go through a probationary period after they’re elected and before they’re fully ensconced in office. At the end of their first six months on the job we should take a confidence vote on their performance. If they flunk, they should be immediately relieved of all duties and powers of office. If they pass the test, they get six more months on probation before the final up or down vote is taken. If they pass muster the second time they can stay. If not, it’s back to the farm.

There are so many turncoats in Washington today it’s hard to know who the good guys are. We ought to have a way to sort them out before they ruin the country. Just think about it. Power to the people!