Back to School

Jaun Williams gets taken to school by the FNS roundtable on Sunday morning:

JUAN WILLIAMS, NPR: Well, I think the Democrats have the best side because not only is it the case that Republicans are in power, but when you look at what Republicans have done in terms of energy policy, it's exactly right when Democrats say it's about tax breaks and subsidies, and they pretend as if demand, which is what Brit's case was -- he said oh, the Chinese, and there's all this new middle class in India that makes demand on oil supply. The fact is oil supplies are at an eight-year high. I mean, it's unbelievable. There's no shortage of oil. What's going on here is speculation about futures in oil as a commodity, and people like Lee Raymond taking, you know, $400 million in retirement.

And so then all of a sudden everybody says well, you know what, the market will bear higher prices, and the prices keep going up, and the government refuses to get involved in any substantial way.

You don't see anything in terms of alternate fuel policy coming out of the energy bill that the Republicans passed last August. Nothing -- all about let's allow for exploration of the Arctic National Wildlife Refuge or let's give more tax breaks to the oil companies.

It seems to me that it's about everything but making sure that the oil -- that the prices at the gas pumps are moderated and that the American economy can succeed. The Bush administration says, you know, the economy is going great guns, why don't Americans understand it, let's fire John Snow.

Wait a minute. The reason is 59 percent of Americans -- I think it was in this week's Post-ABC poll -- said the economy is bad or not doing well, one of the two. And the principal reason is gas prices. Maybe they should notice.

HUME: That's economic glossolalia.

WALLACE: Okay. I admit it. And nobody here is willing to admit it. What does that word mean?

HUME: Speaking in unknown tongues.

WALLACE: OK. Well, you were.

HUME: I mean, Juan, you can't repeal the law of supply and demand. If, as you say, fuel supplies were large enough to accommodate the demand, the price of oil would not be sitting where it is today.

WILLIAMS: What I'm trying to say is that's wrong. There's an eight- year high. You can't argue that point. That's a fact.

HUME: I know, but if demand is running at much higher than that, it's going to force the price up. It's how it works in markets. It's simple. It's been true since the dawn of time.

WILLIAMS: I wish it was true, but what's going on here is that investors looking toward to future, saying oh, you know, look at what's going on in Iraq, look at what's going on in Iran, look at Middle East instability -- the prices keep getting pushed higher, and then the oil companies justify driving up the price. There is no relationship here between supply and demand.

HUME: Oh, OK.

KRISTOL: Well, that's ridiculous. It's an international market. It's a world market.

WILLIAMS: I agree.

KRISTOL: Oil prices on the world market have tripled and gas prices have gone up by almost as much. It's an absolutely inevitable economic fact. There's zero that the government can do.
The things you don't like -- the tax breaks -- they increase the supply of oil. If you repealed those tax breaks, oil prices would be higher, not lower, incidentally.

WILLIAMS: No. What's the case here is that you have -- you know, you keep saying the same thing and I keep saying the same thing, but it's true. You have a supply at an eight-year high despite the international demand.

KRISTOL: Look, what are Exxon Mobil's -- how much of the $3 in gas is corporate profits?

WILLIAMS: I don't know.

KRISTOL: About 25 cents. About 25 cents. And you can cut that a little bit if you want to have a windfall profit tax.

WALLACE: They do have huge profits this year. The top four...

WILLIAMS: Huge profits.

WALLACE: ... companies have $80 billion.

KRISTOL: Right, but Exxon Mobil's profit is about 9 percent, which is not that high by corporate standards. I'm not going to defend the Raymond severance package.

But the notion that you can -- I mean, the Democrats will demagogue it and they'll probably succeed to some degree. But the truth is it's purely a function of supply and demand.
The oil companies are not making nearly as much of a return on their investment as an awful lot of other companies are. But as a political matter, you know, the Bush administration has to get out and explain this.

HUME: And the other thing is if you -- remember this. The price of oil can only rise so far and stay there only for so long, and the reason for that is that it is a paradox of the energy market that the price determines the supply to some extent.

And at a certain level of price, all sorts of fuels, including even oil itself, which remains in old wells, hard to bring to the surface, become economically viable, and that will restrain the price. This will happen over time.


We're not going to go back to the days of the '50s when gasoline was 29 cents a gallon, but these prices at this level will be hard to sustain over a long period of time. WALLACE: Mara, you've got, quickly, the last word.

LIASSON: I think the political bottom line is when somebody goes to the pump, fills up their car, it makes them angry and dispirited. Do they add that to all of the other things that they are unhappy with this current administration?

HUME: And the answer is yes.

LIASSON: And the answer is probably yes.

Don't take just my word for it. Read people who work with money all day, every day.