Monday, October 31, 2005

Why lawmakers are dangerous

They wield the power to tax. Anyone else catch this on Today this morning? Congressional lawmakers are considering a Federal excise tax on oil companies in wake of record profits and record-high gas prices.

The story's sub-text was clear; people want action on the issue of high prices and 'getting' the oil companies is the easy target. Meanwhile, when did the fundamentals of economics change?

Are consumers now setting prices in the oil market? Exxon/Mobil, Shell and Atlantic Ritchfield all purchase oil from our good friends in the ME, with some help from traders in the middle.

The price of oil, down now some from record highs, is set as a function of the market over which these firms have no control. But punishing them with a tax on every barrel of oil they purchase over $40 ought to do wonders for their fiscal health and the economy over-all.

Earth to Congress: if you want to do something about gas prices, incentivize these folks to expand their refining operations.

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