Posted: 11/08/2005
Price-Gouging Inquiry - Windfall For Congress?
NCPA E-Team Scholar Says Congress Should Heed Lessons of History
DALLAS (November 8, 2005) – A congressional inquiry into oil industry profits, set to begin this week, is disingenuous and will be counterproductive, according to NCPA Senior Fellow H. Sterling Burnett, and will lead to reduced investment in oil and gas exploration and possibly even gasoline shortages.
“Congress is about to do something stupid,” Burnett said. “If they enact a windfall profits tax or any other form of price control, the result will be the exact opposite of what consumers demand and their constituents need.”
The congressional inquiry was spawned when prices spiked after Hurricane Katrina, but those prices have receded almost as fast as the storm’s floodwaters. The U.S. government cannot impose the tax on foreign producers, allowing them to earn higher profits and that, Burnett said, makes a windfall profits tax a bad idea. For example:
- It places U.S. oil companies at a competitive disadvantage in the global energy marketplace.
- It would discourage investment in domestic oil production. Higher profits for foreign producers will attract investors, even U.S. investors.
Other forms of price control, like price caps, are even more disastrous since artificially lower prices will increase consumer demand in the U.S. but producers will ship their products to other countries, such as China or India, to be sold at higher prices. Burnett also noted that tens of billions of barrels of oil and gas are locked up by a moratorium in the U.S. on new oil and gas development and production.
“Rather than scapegoat oil companies, Congress should look to its own role in the price of oil and gasoline,” Burnett said. “It’s time for Congress to go back to school; I recommend Economics 101, paying particular attention to the laws of supply and demand.”