Round Up the Usual Suspects

Like Captain Renault in Casablanca, the usual suspects must occasionally be rounded up to make a show of action, even though it truly is only for show. Unfortunately the only “beautiful friendship” regarding America’s energy policies is between the Democrat's pandering and their constituent’s ignorance.

Rep. Edward, Markey, D-Mass. decided that is was time for the regular bit of political theatre that Congress conducts periodically with the “Big Oil” companies. "On April Fool's Day, the biggest joke of all is being played on American families by Big Oil," Rep. Edward Markey, D-Mass., said as he summoned the oil company executives and kicked of his committee hearing. Chairman Markey berated the oil company executives for not doing enough to lower oil prices and to develop alternative energy sources such as wind power and biodiesel.

This sort of show trial has been held over and over again whenever the Democrats control Congress. There has never been any evidence discovered that somehow the oil companies are manipulating the price of oil or engaging in any other sort of collusion. I find it quite preposterous that the government believes it is Big Oil’s responsibility to develop alternative energy sources. If it is in their best interests, I suppose they might. But at the end of the day, they are in the business of exploring and producing oil and its end products. They are not in the alternative energy research business.

The facts are that the Exxon Mobil's of the world have very little to do with the price of oil. They simply don’t control enough of the world’s reserves to do so. Sovereign states such as Saudi Arabia, Canada, Russia, Mexico and the like are the holders of the vast majority of the world’s reserves. And at least at this point, the price of oil is largely a demand story, not a supply story. With emerging countries around the world experiencing a synchronized growth in their economies that is unprecedented – and consuming an increasing amount of fossil fuels as a result.

As an industry Big Oil has an unimpressive profit margin of only about 6%. Yes, the profits in absolute terms are large, simply due to the scale of the operations. Why are the profit margins so low if the price of oil is so high? There are two reasons. First, and the Democrats never seem to remember this when in attack mode, the Big Oil companies pay enormous sums of income taxes to the Federal coffers – more than any other industry. The second reason is that Big Oil spends much of the remaining money on oil exploration and production, attempting to replace reserves as oil is consumed. The replacement of reserves gets more difficult and more expensive with each passing year.

Both Democratic Presidential candidates want to confiscate oil company profits to pay for alternative energy programs. But seizing profits that are desperately needed for further exploration is not going to help the situation – only make it worse. With oil at more than $100 a barrel does anyone really think that entrepreneurs and venture capitalists need further encouragement to develop alternatives, or that somehow the government can do a better job than incentivized capitalists?

Look at the centerpiece of the government’s approach to alternative energy – corn based ethanol. Corn-based ethanol is a boondoggle, consuming almost as much energy as it provides, while driving food prices through the roof - really smart. For 35 years the Democrats have blocked every attempt by our country from having a rational energy policy. The Democrat’s subservience to the endless special interest groups that make up the Democratic base mean that we have no new nuclear power plants, no clean coal, no wind farms near rich, no new refineries, liberal areas, no drilling far out on the continental shelf or in a tiny corner of the Arctic National Wildlife Reserve (ANWR). The Democrats rail against our increasing reliance on imported oil and about high energy prices. But it is the Democrat's parsimonious pandering has directly resulted in the energy mess we are in.

Contrast this to other countries with rational and successful national energy policies. France obtains more than 70% of their electricity from nuclear power. They continue to build plants with advanced designs and have a long history of safety. Brazil is essentially energy independent. They produce large amounts of ethanol from sugar cane, which as a much more efficient energy conversion ratio than corn. They have maximized their use of hydroelectric power. They have aggressively promoted exploration for oil on the outer continental shelf. The result is a new oil field that one day may rival Saudi Arabia.

But no, the Democrats believe it is better to just round up the usual suspects and continue to promote policies that weaken America in order to stay in power.