An Oily Mess

by Steven M. Cohen  •  Jun 6, 2008 at 6:37 am

http://www.buyselljump.com/2008/06/oily-mess

Of all the pitiful activities of Congress over the course of this new century's first decade, none will be more damaging than its failure to address America's energy needs.

Rather than looking for solutions, our lawmakers have sunk to their usual pattern of pandering, grandstanding and scapegoating, all in an effort to appear to be grappling with one of the country's great challenges. In the halls of Congress, cynicism and mendacity rule, while the cost of oil soars into the stratosphere, and the price of a single tank of gas exceeds the family's weekly grocery bill.

A shameful situation, to be sure, but only a sequel to a movie we've seen all too many times.

Consider the events of just a single day last week. Congress busied itself by hauling in a number of oil company executives for their periodic public paddling. Their crime, of course, is making too much money for their shareholders. Somehow, this is supposed to suggest that these greedy evildoers are responsible for high oil prices. That kind of logic plays well on the Planet of Congress, even if it makes little sense here on Earth.

But these stern, finger-waggling congressional interrogators made the most of their opportunity to speak up for the downtrodden. The hearings produced lots of great sound bites and photo ops, which appears to be the chief purpose of holding them in the first place. Certainly nothing resembling constructive policy suggestions emerged.

While an oblivious congressional committee continued to beat on the oilmen, out in the real world, some amazing energy-related events were simultaneously taking place:

In the UK, Parliament lowered taxes on oil and gasoline in an effort to ease the burden on consumers. At the same time, it loosened restrictions on North Sea production, opening up new sites for exploration and drilling.

Mexico proclaimed itself a net importer of oil. This is particularly significant because our southern neighbor is a major producer that now must use its entire production to serve its own needs. It will have to go and purchase any shortfall on the open market, putting additional upward pressure on prices.

Finally, Dow Chemical (followed quickly by other large chemical and consumer products companies) raised prices by a whopping 20% in one fell swoop. Dow is a major user of petroleum in nearly all of their products, and finally had to pass along their vastly increased costs to their customers. Those customers will of course do likewise with respect to consumers.

All of these signs of a significant supply/demand imbalance appear to have escaped our esteemed lawmakers. Having wrung out maximum effect from browbeating the hapless executives, the committee this week has moved on to investigate "speculators" (including nefarious types like Goldman Sachs and Morgan Stanley) who are suspected of rigging oil markets and driving prices higher.

We've got a big energy problem. Don't expect any solutions from feckless politicians with no genuine interest in solving it.

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