Boudreaux: Facts about oil prices, and Obama’s latest job-killing scheme

 

 

Dr. Donald J. Boudreaux, professor of economic at George Mason University, writes in today’s New York Post:

President Obama and his allies are rushing to boost their own popularity by painting “Big Oil” as the biggest villain since Snidely Whiplash…But oil companies don’t control the price of oil and never have.

That misunderstanding — or, in the case of politicians, feigned ignorance — led to the crippling of the energy industry in the 1970s. Now we see the Obama administration, high on populism and zealous to push alternative energy, itching to repeat those mistakes. Yet handcuffing the oil and gas industry will only push energy prices even higher.

The price of crude oil is set by impersonal factors. Global demand is rising thanks to an improving (if fragile) global economy — while global supply hasn’t been keeping up, thanks to artificial restrictions imposed by Western politicians. Supply has also been distrupted or threatened by uprisings in Yemen, Libya and Bahrain. And the dollar — the currency in which oil is priced — has been weak. Together, these factors recently pushed the price of a barrel of crude up to highs of more than 37 percent above a year ago…

…Honest analysts know these facts. But politicians ignore them in favor of sowing suspicion of the industry. The latest “solution” they offer is to reduce supposed tax-code “subsidies” to Big Oil.

In fact, the energy industry is hardly undertaxed: It pays an effective tax rate of 41.1 percent, compared with 26.5 percent for the rest of the S&P Industrials.