More Energy Reading

In the last few weeks, we've been hearing all kinds of crazy talk from politicians about the price of gas. To separate reality from delusion, here are a couple McClatchy stories on that topic.

Here's an interesting one: the Department of Energy has determined that drilling in ANWR would lower the price of oil by 75 cents a barrel.

This story mentions three things that could lower the price of gas in the short term:

  1. More regulation of the commodity markets, where speculation has driven up the price of oil.
  2. Releasing up to a million barrels of oil per day from the strategic oil reserve, for a period of 90 days.
  3. Boosting the value of the dollar, since oil is traded internationally in dollars, which is a weak currency compared to others. One way to do this is for the Federal Reserve to raise interest rates.

The piece notes that all of these suggestions are politically unpalatable. Eric Massa has mentioned boosting the value of the dollar before. Randy Kuhl has mentioned none of these possible cures.

Finally, on the windfall profit tax, this piece is a pretty good run-down of both sides of that issue. I agree with this quote:

Jared Bernstein, economist at Washington's Economic Policy Institute, a liberal think tank, called the windfall tax a "feel good idea."

More effective, he said, would be "closing loopholes and tax forgiveness...these guys are getting out of paying billions of dollars."

Among his ideas: Stop the "royalty relief" given to oil producers about 10 years ago. When oil companies drill on public land, they're supposed to pay royalties to the government, but Washington gave the firms a break when prices were low-and never repealed it.

Massa has been a consistent supporter of ending tax breaks for oil companies. Kuhl hasn't taken a position that I've seen on this issue.


I agree that an excess profits tax is the wrong approach -- though it makes an excellent sound bite in an election year with oil prices and profits so high. It may be a little more difficult (or politically impossible) to close the tax loopholes and the royalty exception, but if it can't be done now, when will it be possible?

This is an opportunity for Democratic candidates and the majority in congress to lead by showing that they are in fact for transparency (loudly publicize the loopholes and exceptions) and that they want fairness, not punishment for the oil companies.

Agreed, and conservatives should also support ending what is essentially a subsidy for oil companies, while they would disagree that government should determine which profits are "excess".

Why on earth should the Jed Clampetts of America be getting rich? As best I can tell, none of them is a whit more or less responsible for their oil being present under certain bits of soil than the rest of us.

Yet we let them treat this as their private treasure. Shouldn't we-the-people be receiving the royalties on this oil, rather than Jed and Exxon Mobil?

I'm not keen on taxing profits. Tax our resources as they come out of the ground, and recognize that oil is our common treasure.

Alaska has it right, using the oil revenue to fund common spending and investing some of it to provide an income to every man, woman and child who lives in Alaska, through the Alaska Permanent Fund.

When oil prices rise, the US Treasury should be the beneficiary, not the folks who happen to "own" our awesome natural resources through some laws which allow them to privatize what is rightly common treasure.

LVTfan: So are you saying that there shouldn't be any private mineral rights? Isn't it in the public's interest to allow at least some mineral rights on private property, so the Clampetts of the world have some incentive to let Exxon come and drill the bubbling crude they find when shootin' at some food?

I thought that the Clampett myth had been exploded by the excellent investigative journalism of Geico.

Grazing, lumbering, drilling and mining on public lands at little or no cost has always bothered me. Just as the legal system that we own in common is mined mostly by lawyers and the wealthy. Sorting all that out, even without the factor of political and economic influence would be really messy. So we have mineral rights on private land.

It makes me nervous when people want to infringe on personal property rights. I have no oil or gas under my property that I know of, but even if I did I only own a bit more than an acre and don't stand to get rich if something is found.

Perhaps we can take a look at Russia, China or Saudi Arabia. Not many property rights in those places. Perhaps their system works better?

I'm all for property rights when they protect property that an individual created, or bought from the fellow who created it -- a house, a car, a piece of machinery, a painting, a sweater, a bushel of fruit. But I am troubled by the notion of extending the same sort of property rights to things not of human creation -- land, water, air, electromagnetic spectrum, minerals in the ground, non-renewable energy sources. Why should some of us be permitted to charge others for something we didn't create, our great-great-grandparents didn't create, and which all of us depend on access to? Don't our founding documents say that it is self-evident that we're all -- ALL! -- created equal? Why should some of us be able to charge others for something not of our own creation? I'm not saying that payment is not due, just that it is due to the commons, not to the individual, corporation, trust, pension fund, endowment, etc., who happens to have title.

How do we provide the incentive to put the land or minerals to good use? By taxing their value, whether the owner of the land or minerals finds it convenient to use it well or not at all.

I realize this is radically different from the way we do things now, but where is the fallacy in my logic? It seems to me to be eminently fair. If someone has a private home in the middle of a thriving business district, they are welcome to keep it there as long as they like, as long as they compensate the community, in the form of a tax on the land's value, just as much as the fellow who owns a comparable lot next door, and puts it to good use, creating jobs, shopping venues, sites for businesses, housing, etc -- whatever it is that the market needs. Similarly, when a particular mineral is valuable, those who hold land which has that mineral under it owe to the commons a payment for holding onto that land, whether they choose to mine it, or hoard it. If a site's highest and best use is as a lot for a single family home, great. That's what should be there. If it turns out to have valuable minerals under it, a single family home is probably no longer the highest and best use, and if the owners want to keep it at a lower use, that shouldn't be at a cost to the community.

Are some of us God's eldest sons, entitled to inherit the earth, and the rest of us destined by luck of birth to pay them rent forever? I don't think so.

Natural resources should be our common treasure, not someone's private bounty.

A couple of quick thoughts:

1. We are not all created equal. The minute you are born, you may have a high IQ or you may not. All your body parts may function, or maybe not. You may be born in Pittsord or you may be born in inner city Chicago. As time goes on, your parents may have the resources to send you to a great college or may not have the resources to send you to any college. They may teach you a great work ethic or maybe a poor one. Heck, we are not even equal in the eyes of the state. Some can afford great lawyers, others can’t.
2. Property owners are well taxed for their property, especially in the state of New York. Why should a property owner pay taxes if they don’t have exclusive use of their land, even if they were lucky enough to have oil or gas under it? If you see a need to spread the wealth to less fortunate people, use the legislative process to increase property taxes or even the taxes on the income from the oil and gas.
3. While I understand your theory, it has not proven itself to work in the real world. Concentrating more power in the state will eventually lead to fewer freedoms, not more.

Elmer makes a number of good points.

I wanted to add that your mention "highest and best use" as if it is intuitively obvious and easily determined. Do we reassess every month? every year? every generation? What community judges the standards: neighborhood? state? country? world?

Not to mention, as Elmer notes, the kind of state power necessary to determine "highest and best use" would involve an all-encompassing totalitarianism that would cause even Chinese emperors and Joe Stalin to pause.