Not long ago, I challenged readers of this column to "debate me" according to a format. I had proposed the creation of a National Petroleum Regulatory Commission.
Last week, I hinted to readers that I'm really not wild about the idea myself. My essential point is to demonstrate how people like the readers of this column -- who are representative of those who respond to the public opinion polls we conduct -- are often ahead of the pundits and politicians. Even as the idea of regulation of oil companies gains more attention, most Americans will be against it. The best way to illustrate that is to let readers shoot down the idea I proposed.
People from all over responded to my invitation to debate. Qualifying entries documented their arguments with facts from reliable public news or information sources. Thanks especially to those who were "finalists" in this "contest."
Among my reasons for a regulatory commission were: the rapid rise in oil prices and profits; the fact that 70 percent of Americans in a national poll said the increase in oil prices was causing their families hardship; there are now so few oil companies that they are becoming like privately owned utilities and other energy companies that are considered to be virtual monopolies, and so are routinely regulated in most states; and Democrats in Congress are going to goose the public's resentment of the situation by proposing a break-up of big oil companies. I added that such an overstep by Democrats would be a slippery slope for the free-market economy in general.
My plan had some merit, but Bill Wavering of North Little Rock, Ark., did the best at refuting it. As promised, and per his permission, here is his response.
OPPOSITION TO PROPOSITION: Regulatory commissions are more detrimental than helpful. A report by the U.S. Energy Information Administration that surveyed the events in the 25 years following the 1973-74 oil embargo concluded that federal price controls and allocations systems not only "failed to resolve these problems (electricity brownouts and rapidly rising prices), they seemed to aggravate them."
According to a 1990 Report of the Congressional Research Service, the windfall profits tax that was signed into law in 1980 and repealed in 1988 drained $79 billion in industry revenues that could have been used to invest in new oil production -- leading to 1.6 billion fewer barrels of oil being produced in the United States from 1980-1988. The tax reduced domestic oil production as much as 6 percent, and increased oil imports as much as 16 percent.
POINT ONE: BusinessWeek analysis of the data from the five-year period September 2000-September 2005 shows that the profitability of oil and natural gas companies (5.8 cents per dollar of sales) has been just slightly above the profitability of all industries combined. Source: www.conocophillips.com/newsroom/other_resources/energyanswers/oil_profits.htm
POINT TWO: While the media continue to blame the big oil companies for gouging U.S. motorists as they collect record-breaking profits, the windfall profits raked in by the government in the form of energy-tax revenue actually dwarfed the oil companies' jackpot.
Source: "Gov't Gas Taxes Exceed Oil Company Profits," April 26, 2006, www.newsmax.com/archives/ic/2006/4/26/90121.shtml
POINT THREE: Both sides of the political spectrum are participating in demagoguery. "The government should consider a tax on oil companies if they make excessive profits amid rising gasoline prices," a leading Republican senator said Sunday. Pennsylvania Sen. Arlen Specter, chairman of the Senate Judiciary Committee, said a windfall profits tax, along with measures to stem concentration of market power among a few select oil companies, could offer eventual relief to consumers hurting at the gas pump.
SOURCE: "Sen. Specter: Tax Oil Co. Windfall Profits," April 23, 2006, www.newsmax.com/archives/ic/2006/4/23/231739.shtml
BETTER PLAN: Bipartisan federal support of the energy industry through the enactment of a comprehensive national energy policy that puts consumer economic needs first. Such a policy should decrease the regulatory permitting requirements for new refineries, while vigorously supporting the further exploration/exploitation of all domestic energy sources, without regard to the location of those sources.
Bill Wavering relied on an oil company's "newsroom" releases for some of his points -- not the most objective source. But the points they offer are arguably correct.
Bill's argument about the government's benefiting from windfall taxes more than industry does is well taken.
The key point came with Bill's evidence that federal price controls and allocations in the 1970s failed to have the intended effect.
Bill's winning argument aside, the fact remains that continued high gas prices without some sort of tangible response from the White House and Congress will hatch tough political consequences for public officials who are seeking re-election this fall. And that's a debate I'd win every time.
For submitting the winning entry, Bill Wavering will receive one of my books. (That's a prize, Bill, not punishment!)
Thanks to everyone who participated. And yes, because this column is about America's opinion, and because so many readers took the time to submit entries, from time to time, we will resume the fun with more debate contests.
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