Congress plays the blame game

The News Virginian
Published: May 22, 2008

A thumbs-up, thumbs-down assessment of newsmakers here and beyond:
In a deft sleight of rhetoric, Congress amid the gas crisis has cast as villain oil companies, pointing to their record profits while the hand of government at lawmakers’ perpetual behest continues to pluck clean taxpayers’ pockets. Oil companies make an average of 10 cents on the sale of a gallon of gas. The federal government pulls in almost double that amount. Add Virginia, and government’s take grows to more than triple. Drive to New York, and the gap grows to almost seven times. It is certainly true that oil companies’ profits are extraordinary: Exxon’s were $40 billion last year. But the more telling number is margin, a potential indicator of gouging. Exxon’s was 10 percent last year, roughly in the middle among Fortune 500 firms and far behind companies such as Microsoft, which frequently records profits of 25 percent or higher. Sales volume, not exorbitant pricing, has produced large oil profits. The distinction is important, but ignored in the Capitol where there’s political hay to be made in gushers. Concealed by lawmakers’ calculated rancor is the fact that prices largely are dictated by factors beyond oil companies’ control, namely supply and demand, the former restricted by U.S. policy against exploration and drilling in oil-rich areas and the latter driven by economic growth in China, India and elsewhere. Conveniently oblivious to these and other facts, Democratic presidential candidates Barack Obama and Hillary Clinton are rallying for a windfall profits tax, perhaps forgetting that the last time this concept was applied, starting in 1980, 10-year revenues missed their target by more than 75 percent. Lawmakers, a group more unctuous than the stuff Exxon refines, disdain real solutions to problems they create. Abundant sources of oil within U.S. boundaries are restricted from exploration and production. Tapping these supplies would reduce reliance on OPEC and pull down prices. More taxes and Beltway bloviating are tried methods; less restrictions might offer true results.
Meanwhile, from somewhere along the campaign trail, Republican presidential contender John McCain proposes to lift altogether the federal gas tax for the summer months. He is roundly criticized for this by Obama, who supported it in his halcyon days as an Illinois state senator then spun left declaring that lifting the levy would choke off the flow of money for federal road projects. Obama’s opposition to the tax holiday has gained support of left-leaning editorialists for the bogus reason that the levy boosts conservation. Perhaps more valid assertion is that the move would help spur demand, which would in turn drive prices higher, negating the relief. Those who suggest McCain knows this but ignores it because of the obvious political gain to be had have a point. A better move would be to peel off the myopic federal ethanol dictate passed several years ago that since then has sent food and grain prices spiraling.
On the subject of taxes and gas, Augusta County Supervisor Nancy Sorrells wants more of the former. She asked state lawmakers to tack on 2 cents to Virginia’s gas tax, currently 19.6 cents a gallon and 11th lowest in the nation. A piece — we’re guessing a very small one — of the $100 million that would generate could be used to improve roads in her Riverheads District, where goat paths sometimes pass for highways. Ninety-nine miles of road in Riverheads are unpaved. Alongside one of those gravel stretches sit 70 homes. Some roads bear a wartime look, riddled with potholes and lined by broken shoulders. Such deficiencies are dramatically overshadowed by the knot of congestion in Northern Virginia, to which lawmakers would devote most of any extra transportation money. Absent considerations about how revenue from a gas tax increase would be divided, Del. Ben Cline, R-Rockbridge County, is reluctant to lobby for a higher levy when prices are soaring and the economy is staggering. “The gas tax is a regressive tax that would impact rural people the most,” he said. He is correct on both counts. Farmers here and beyond already are straining to cover skyrocketing grain and fuel costs. While Sorrells has a case, now is a more inopportune time than most to be increasing the tax load.