More than two years ago, now-House Speaker Nancy Pelosi and her Democratic colleagues promised what they called a “common sense” energy plan to bring down prices at the gas pump. Since that time, the average cost of a gallon of gas has soared from $2.33 to $3.62, an all-time high.
Today, 744 days later, congressional Democrats finally unveiled their grand proposal to the American people.
To most Americans, addressing rising energy prices might include at least a bow to the law of supply and demand. It might contain some true common sense ideas such as stepped-up exploration, added domestic refinery capacity, or other measures to increase U.S. energy and reduce dependence on foreign supplies.
But Democrats made clear they have other priorities. They want to tax, sue and investigate their way out of this problem.
Unfortunately, their agenda will do nothing significant to increase the supply and reduce the price of gasoline in America.
A central component of the Democrats’ energy bill is to increase taxes on U.S. energy companies. This is almost bizarre. Democrats have clearly not learned the lesson from the 1980s when the windfall profits tax—a tax on oil produced in the U.S.—was first enacted.
We know now as a matter of certainty that this tax had the opposite effect than what was intended. It led to lower domestic oil production—not lower prices at the gas pump. In fact, the nonpartisan Congressional Research Service estimates the windfall profits tax decreased domestic oil production by as much as 1.2 billion barrels between 1980 and 1986. It also drained $38 billion that the domestic energy sector could have used to invest in new production and exploration, or development of alternative fuels.
At a time when our goal should be reducing America’s dependence on foreign oil, imposing massive new taxes on American oil companies promises an entirely different result.
Another key component of the Democratic plan dusts off an old chestnut—again calling upon the Federal Trade Commission to investigate the possibility of price gouging in the energy market. Democrats clearly believe Americans have short memories. The FTC has conducted dozens of investigations, including in the aftermath of Hurricane Katrina, and not once have they found significant wrongdoing in the marketplace.