Congress' Oil Barons

By INVESTOR'S BUSINESS DAILY |

Energy Policy: A hypocritical Congress drills oil executives for high gas prices while driving up food prices by subsidizing ethanol. If the first presidential primary were in Alaska, would we be getting oil from ANWR?

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As we watched Tuesday's show trial held by the Select Committee for Energy Independence and Global Warming, the thought crossed minds that the senior executives of our five largest oil companies should be the inquisitors and the honorable members of Congress the ones on the rack.

The executives were asked, in essence, are you now or have you ever been profitable? "These companies are defending billions of federal subsidies . . . while reaping over a hundred billion dollars in profits in just the last year alone," fumed Rep. Ed Markey, D-Mass.

At least these profits are poured into a useful product that fuels the American economy. They take their profits from oil production and put them to work finding more oil. Congress is more concerned with pork-barrel spending than oil-barrel production.

Markey, et al., hide the fact that when oil companies "profit," so does Uncle Sam. In 2006, Exxon alone paid federal income taxes of $27.9 billion, leaving it with $39.5 million in after-tax income. Gas prices go up, but they also go down. Gas taxes never go down.

According to Tax Foundation data, U.S. oil companies cleared $630 billion after taxes while paying $518 billion in federal and state corporate taxes at an average rate of 45%. Over the same period, an additional $1.34 trillion in gas taxes was paid by consumers to state and local governments and the feds.

Global demand is in large part responsible for rising fuel prices. Prices rise in world markets, not in corporate boardrooms. It is easier, however, to blame Exxon and Chevron than China and India.

At least China is looking for more oil — just 45 miles off the Florida coast with its Cuban friends. The U.S. Geological Survey says the North Cuban Basin contains 4.6 billion barrels. That, Rep. Markey, will fuel cars in Beijing when it should be fueling cars in Boston.

Our own growing economy will need 28% more oil by 2030, according to the Department of Energy, and 19% more natural gas than was consumed in 2005. Yet we are cut off from 10 billion barrels of oil in the National Petroleum Reserve in Alaska in addition to another 10 billion in the Arctic National Wildlife Refuge.

At over $100 a barrel, that's a lot of untapped wealth and energy. Someone tell Markey that the oil recoverable in ANWR is roughly the amount produced by 41 of the 48 continental states and enough to satisfy all the oil needs of his Massachusetts for 75 years.

Markey and the Democrats don't mind tax breaks and subsidies for alternative fuels such as ethanol, which is made from corn grown in Iowa, the first caucus state. If the first caucus was in Idaho, we'd probably be making fuel from potatoes.

Almost $93 billion in subsidies will flow to ethanol and biodiesel producers by 2012, according to the Pacific Research Institute. A gallon of ethanol delivers 30% less energy than a gallon of gasoline, so motorists will find their overall gas mileage falling as they shell out more money.

Ethanol not only increases the cost of driving to the supermarket but also the price of the food you buy there. We're consuming 15% of our corn to replace 2% of our gasoline. That drives up food prices here and around the world. But don't expect any hearings grilling executives from Big Corn.