Oil Company Legislation
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Despite the government’s “best” efforts, most reasonable people realize that there is no amount of legislation that can solve our oil problems. Congress seems only capable of making things worse.
The Monkey House
A few weeks ago we witnessed a political act of such unimaginable stupidity, it is hard to not choke at the mention of it.
A cursory review of the details is worth a minute of your time. This compliments of The Oil & Gas Journal…
“WASHINGTON, DC, May 20 — The U.S. House passed, by a vote of 324 to 84, a bill that would create a new oil antitrust task force within the Department of Justice. Supporters of HR 6074, which also would give DOJ authority to sue foreign oil cartels for violating U.S. antitrust laws, included 103 Republicans, according to its sponsor Rep. Steve Kagen (D-Wis.).
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“‘Until we finally have an energy policy other than drill-and-burn, this bill will begin to set things right for the American people. We cannot drill or grow our way out of this energy crisis. We must begin to think differently in America. That includes loosening the stranglehold other nations have on our economy and exploring new forms of energy,’ he said following the vote.
“The new ‘Petroleum Industry Antitrust Task Force’ would be charged with determining the existence and extent of gasoline price gouging, anticompetitive price discrimination by refiners, actions to inflate prices by constraining supplies, and possible oil price manipulation in futures markets, Kagen said.
“The bill, which would amend the Sherman Antitrust Act, also requests a Government Accountability Office study on the effects on competition of prior oil industry mergers and divestitures, he indicated.
“‘This legislation will address the loopholes and exemptions that oil companies exploit at the great expense of our citizens,’ Kagen said. ‘By passing the Gas Price Relief for Consumers Act, the House agrees that it is time to give US authorities the ability to prosecute the anticompetitive conduct committed by international cartels that restricts supply and drives up prices.’”
Now, unless you were informed upon entering your sixth year of grammar school at the age of 21 that you’d have to stay back another year, you’ll recognize this latest bit of pandering as stupidity so profound as to bring a sane man to his knees.
For one, oil is a global market and the members of OPEC include the world’s largest suppliers to that market. In a world of increasing demand bumping up against flattening global production, these are not the people one wants to alienate — that is, if we want to drive our cars and tractors and heat our houses with something other than broken bits of heirloom furniture.
Threatening to sue them, or worse, actually suing them, is unlikely to bring a warm response. Can you imagine the oil sheiks being made to present themselves in the docket in a U.S. Court? (If Homeland Security would let them through the airports, that is). Oh, what a fine media circus that would be! Frankly, if subpoenaed, I think they’ll just refuse to show. And what then?
Secondly, it also reinforces the fiction that the members of OPEC can actually do something to increase their production, as opposed to just talk about it. It reminds me of Saddam’s pledge to unleash the “Mother of All Wars” against the U.S. Forces…which turned out to be more like the “Mother of All Foot Races to the Rear.”
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The way the OPEC quotas are assigned, the bigger the reserves a member state reports, the more production the member is allowed to sell. Which is why, since the upward reserve adjustments of the late 1980s - made in anticipation of the revision to the OPEC quota system — there have been virtually no reserve declines reported by OPEC members. It’s as if a magic oil genie resides under the ground, providing oil in unlimited quantities with a twitch of the nose or a nod of the head over crossed arms:
Put more directly, the current reserves are a fantasy, and the ability of OPEC to actually raise production is greatly constrained.
But there is more in this legislation to dislike. Much more. For one, it contains the implicit assumption that all levels of the energy business are corrupt, and the executives of all these firms spend long hours in cigar smoke-filled rooms plotting and scheming to take every advantage of hard-working Americans.
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