Glassman Nails Bush to the Wall

There's an excellent article up by James Glassman over at TCS Daily that you should read, in which he rightly slams George Bush -- an oilman for Pete's sake -- for not standing up to the gas price demagogues today. Although Glassman focuses on Bush's weaknesses on energy policy, it is worth noting that his piece reiterates many of the points I made recently when I asked whether Bush was "less than or equal to Carter".

First, we'll get his good ideas out of the way since he immediately undercut them with his idiotic "addiction" analogy -- after first timidly offering them in diluted form, as Glassman points out in the last paragraph below.

[The President's] best ideas were to urge Congress to cut the red tape involved in building new refineries and expanding old ones (he pointed out that a new refinery hasn't been built here in 30 years) and to call for fewer boutique fuel mixtures (condemning an "uncoordinated and overly complex set of fuel rules") and for a slowdown in the timetable for mixing ethanol with gasoline, again to meet government mandates. It's clear that shortages and price spikes are the result of an inability to move ethanol, whose production is still a cottage industry, around the country.

Bush also made a forthright plea to open up a small part of the Arctic National Wildlife Refuge for exploration, pointing out that, if such a move had been made 10 years ago, we'd be producing a million extra barrels a day (the U.S. uses about 16 million, of which roughly two-thirds is imported), and he said that "we can find crude oil in our own country in environmentally friendly ways."

But these ideas were mainly rhetoric. The right approach would have been to end the boutique fuels and ethanol nonsense once and for all. He should have pinned the blame where it belonged -- on Congress, for refusing to take steps to encourage drilling on the Continental Shelf and for pandering to the ethanol (that is, corn) lobby by forcing drivers to use a pricey fuel with little environmental value. [bold added]

Glassman then ticks off a few more important things after he first quotes himself to point out that, "America is no more addicted to oil than it is addicted to bread, to milk, to paper, to water, to computers or, in the immortal words of the late Robert Palmer, to love." To which I can only add -- by quoting myself:

Our country needs energy. To call our extensive use of oil an "addiction" from which we must "recover" is disingenuous and should be stopped at once. When a schoolyard bully steals your milk money, you don't let him keep taking the money while you recover from your "milk addiction". You don't give him money, while trying to smuggle in more milk money. You don't smuggle in powdered milk. You don't waste a bunch of time looking for "milk substitutes". You take the bully on, enlisting the aid of your friends if need be. You whip his ass and then you go right on drinking milk.

The "bully" in my essay was foreign governments who steal private property (i.e., oil fields) unchallenged -- and their domestic sympathizers in the environmentalist movement and other leftist quarters who keep on throttling the oil industry at home.

Glassman also rightly slams the whole idea of the government scapegoating -- I mean, "investigating" -- private industry for the price increases.

After talking about addiction, the President said he was going to crack down on price gouging -- that old bugaboo. He said he had asked the Justice and Energy departments to find out whether the rising price of gas was partly the result of manipulation. This is absurd. The gasoline market is broad, fragmented and highly competitive. Price gouging has been studied many times, to no effect. Gas prices are rising because crude oil prices are rising.

All Bush has to do is read Chapter 11 of his own "Economic Report of the President," which concludes, first, that "the prices that consumers...pay for gasoline depend heavily on the prices that petroleum refiners pay for crude oil," and, second, that "crude oil prices have risen steadily over the past several years due to growing world demand."

In addition, this has been a tough year for geopolitical risk -- which tends to boost oil prices in the futures markets. Chad, Iran, Iraq, Nigeria, Venezuela -- all have been subject to real or potential supply disruptions. And the Persian Gulf remains a dangerous place. [bold added]

Did I read that right? Chapter 11? Well, Bush is intellectually bankrupt....

I would add to Glassman's observation that Bush, as an oilman, knows better than to babble about price gouging, that Bush, as a wartime President knows why our foreign supplies are a wee bit shaky. This pandering to the economically illiterate and the Democrat base not only fails to make the case for his good ideas, it sets the stage for the Democrats, leading up to the mid-term elections, to propose far worse measures than Bush's "war on oil addiction" or "war on price gouging" or whatever he wants to call it. And the Dems will look more sincere when they do it, too.

And then Glassman points out that any talk of taxing the so-called (by Jimmah Carter and his Republican soul-mate, Arlen Specter) "windfall profits" will discourage further domestic oil exploration.

Imagine you're the CEO of an oil company today, listening to Specter talk about a windfall profits tax, the President go on about "addiction" or Frist about "price gouging." Your main job as CEO is to allocate capital, to decide where to put your shareholder's money for the long term. Are you encouraged to make "strong re-investment [of] cash flows" in this environment? I doubt it. Maybe the best idea is to stash the cash in Treasury bills or buy a retail chain or give the money back to investors. [bold added]

If politicians truly want oil companies to invest in drilling and refineries, the best tactic is to recognize that these firms are not villains. Gosh, maybe they're even heroes.

On that last point, maybe the President could begin to refresh his memory by watching "Oil, Sweat, and Rigs" some time.

Will Bush come to his senses before Glassman comes off sounding like a prophet? Will the congressional Republicans? Will there be a revolt among the small-government conservatives? Or will the GOP act like the Democratic Party until the real thing takes office in November?

-- CAV