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Wednesday, April 26, 2006

How To Really Screw Up Oil Prices

In their infinite micromanagement to look like they care, Congress has come up with a new way to screw up oil prices, and screw the consumer.

First, the micromanagment. Because the IRS obviously is the wrong institution to audit tax records, the Senate Finance Committee has demanded 5 years of tax records from the 15 largest oil and gas companies.

While I'm all for holding companies, and individuals, to the fire when it comes to paying their taxes, that's the IRS's job, not a congressional committee's. Just more show to make the public think Congress is doing something, as I mentioned in "Politics as Usual".

Now, how to screw up prices, the Senate is looking to require different accounting practices for oil held in inventories by oil companies, or at least the 5 biggest. The justification is an extra $800 million a year in taxes for the next 5 years.

Congress, of course, assumes that the companies won't change the way they operate to avoid the new tax. Of course, Congress doesn't ever consider what others will do when they do stupid things. Instead of paying hudreds of millions in extra taxes for their inventories, they'll just reduce them to bare bones levels to avoid it.

What does this new accounting mean to you, the consumer? Well, next time there is a hurricane and supply is interrupted, the buffer that oil companies try and maintain won't be there. So instead of $4.00 you'll see higher prices, and lines as more stations run out of gas. Of course, when that happens Congress will be up in arms wondering why they aren't maintaining the inventories.

There is of course another option for the oil companies, sell their product in countries more tax friendly to them. In a very tight supply market like we have, Japan, China, India, and other countries would gladly have the companies keep their reserves in their countries. And again, we'd come out the losers. But Congress wouldn't realize that, either. While they are good at passing laws, they never seem to have studied the law of unintended consequences.

Robosquirrel linked with "What You Don't Know Hurts Everybody"
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5Comments:

Blogger Rebekah said...

Yeah, doesn't Congress mess everything up?
Something needs to be done, but gosh, someone other than this bunch needs to step up. This is just election politics.

8:37 PM  
Blogger Praguetwin said...

"There is a simple solution to every problem.... and it is wrong."

Ted Kennedy (although he may have been quoting).

11:52 AM  
Blogger Robosquirrel said...

Too pissed off to be coherent today, and this whole government intervention thing is just making it worse. Had to skip my daily pot of coffee due to the live firefighting training this morning and I've been perpetually irritiable all day. Working on the first pot now... at this rate, I ought to be myself sometime this evening.

Linked you up, though.

4:02 PM  
Blogger Crazy Politico said...

PragueTwin, you are right on that statement, regardless of who made it.

Rebekah, Election year politics is about the size of it.

Robo, I know that feeling. I've had to switch to 1/2 decafe due to blood pressure concerns. This stuff does irk me when I'm not hyped on caffine and nicotine.

6:42 PM  
Blogger James B. said...

Congress passes ridiculously complicated tax laws full of loopholes, and now is complaining that people are following them. What a joke.

10:02 PM  

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