RAPIDLY rising gasoline prices are a conundrum for President Obama. To the extent that he can milk them for political gain in demonizing oil companies, the higher the price the better. But to the extent that voters blame him for mishandling energy policy, it could take a bite at the ballot box.
Voters don't like paying more at the pump. Experience tells us that Obama will reach sympathetic ears with his harsh rhetoric about Big Oil. In his campaign address of Jan. 24 (also known as the State of the Union speech), Obama's high notes included a commitment to an energy policy that doesn't inordinately stress “clean” sources of power. Yet he also demanded a major tax increase for oil and gas companies. And he extolled the virtues of factories that make products for Americans in America.
Manhattan Institute Senior Fellow Robert Bryce says the Obama-backed subsidies for renewable energy technologies are out of proportion to their worth and that tax breaks for oil companies aren't all that big relative to their benefits — in terms of job creation, reducing dependence on foreign energy sources and actually powering the country. This includes running the aforementioned factories.
Fairness would dictate that no energy industry sector gets more government help than any other, but this isn't a matter of fairness. It's a matter of choice and pandering when Obama exalts renewables and denigrates fossil fuels. The wind power industry, for example, wouldn't be what it is without government help, a policy that we support for a limited period. Absent tax credits, fossil fuels would continue to run the country. But the engine wouldn't run as smoothly as it does now because such a policy would favor foreign suppliers over domestic producers and probably result in even higher gasoline prices.
Obama will tell you that energy firms don't need taxpayer help because they're so profitable. He'll also tell you that American manufacturers who move jobs overseas are to be held in low esteem. Fair enough, Mr. President. So why not take a bite out of the Apple?
Apple Inc. has a market capitalization of $475 billion and a profit margin of nearly 26 percent. In contrast, BP (the largest producer of oil in America and off its shores) has a market capitalization of $147 billion and a profit margin of 6.8 percent. Yes, but Apple is a manufacturer of cool stuff. It cultivates its public image and environmental responsibility. It's a clean firm that employs thousands of Americans.
Yet virtually none of its factory jobs are held by Americans. Apple has exported its manufacturing to China while American oil companies — whose jobs are here — have been exporting oil and refined products to other countries, improving the balance of trade, the reverse of what Apple has been doing.
Americans want what Apple makes. What Americans need, Bryce says, is “more cheap, abundant, reliable energy.”
We won't get that by taking a big bite out of oil and gas companies.