Dems 'Oil' Wet About Gas Prices

By Donald Lambro

WASHINGTON -- Have you noticed that ever since the Democrats took control of Congress, oil and gas prices have been going through the roof?

The Dems won control of the House and Senate last year in part on the notion that sinking billions of taxpayer dollars into corn-based ethanol would combat global warming; itself a dubious superstition that some scientists say is part of the Earth's natural environmental changes over many eons.

Among the predictable results: increased gas prices because of higher refinery costs to blend ethanol into petroleum-based fuel, and higher grain and food prices because the government-induced demand for corn drove up agricultural prices on the commodities market. This is known as the law of unintended consequences, and it seems to be popping up with just about everything the Democratic-run Congress has been passing lately.

The Democrats also ran against the oil companies, charging them with collusion to drive up the price of oil and gas, attacking their rising profits and high salaries, and proposing that the answer to all this was to smack Exxon-Mobil and their partners in crime with an "excess profits" tax so that Congress can spend that money on other things -- like ethanol subsidies.

Every so often, to demonstrate their concern about higher gas prices, Congress calls oil executives up to Capitol Hill to explain why the numbers keep rising. Lawmakers angrily wag their fingers at the cornered businessmen, threatening to uncover their alleged skullduggery. The executives in turn patiently explain how oil prices rise and fall in global trading and are largely driven by the laws of supply and demand. The hearings end and not much comes of it except some newspaper headlines.

An abysmal level of ignorance about all this pervades Congress, a cloud of cluelessness breathtaking to behold. Apparently these lawmakers skipped Economics 101 or were never taught about the principles of supply and demand. Here's what Democratic Sen. Herb Kohl of Wisconsin told senior oil company executives at a recent Judiciary Committee hearing: "People don't get it. Demand is not crazy. Why are prices going crazy?"

I guess Kohl must have missed all the stories about skyrocketing global demand for oil. One executive explained that world demand was certainly crazy, driven by fast-growth economies like China and India. Oil and gas inventories have barely kept pace with that demand, but the gap between supply and demand has grown tighter, and that drives up prices in global commodities markets.

Kohl seemed unconvinced by this explanation because it did not fit in with his party's belief that oil executives are crooks who charge excessively and draw lavish paychecks. Indeed, the executives were actually asked how much they were paid, as if this had anything to do with production and refinery capacity, inventories and oil exploration.

"Where is the corporate conscience?" Sen. Richard Durbin, Democrat of Illinois, asked the executives at one point in the hearing. Such is the demagoguery that now permeates congressional inquiry.

But Durbin faced some uncomfortable cross-examination that evening when he was challenged by CNN news anchor Campbell Brown who wanted to know what he and the Democrats were doing about rising oil and gas prices. Durbin responded by attacking President Bush, suggesting that the answer lay in a change in administrations, but he did not utter a single plausible solution to the problem.

Brown tried again, reminding him that Democrats said they were going to deal with this issue, and asked, "What are you proposing to do to bring down gas prices?" Again Durbin dodged the question, saying instead that the answer was to elect more Democrats to Congress in November. That ended the interview.

Perhaps the reason Durbin's responses were so evasive has to do the fact that Democrats don't have answers that make any sense. Ethanol is now a big political problem for the Democrats and is seen as one of the chief causes of higher food prices. Fatter farm subsidies, which Democrats stuffed into last week's farm bill, is the other, pushing up the price of grains, milk, bread, beef and poultry. Democrats talked of expanding ethanol subsidies last year, expanding production into other environmentally friendly resources such as witch grass and wood chips. Two things Democrats did not run on last year: boosting oil and natural gas exploration here at home and building more refineries.

"The basic story that has brought oil from $20 to $130 is that world demand is growing robustly when world supply is not," says Jeffrey Rubin, chief economist of CIBC World Markets.

"It all comes down to supply and demand," says oil magnate T. Boone Pickens who knows a thing or two about both.

That's the problem and the solution in a nutshell. But it's not the answer Democrats like Kohl and Durbin want to hear because in an election year, fanatic finger-pointing sells better.

So they continue to point the finger of blame at oil-company executives, commodity traders, and gas-guzzling SUVs, and promote wood chips, witch grasses and windmills as the answer to all our energy needs.

What the 2008 Farm Bill Means for American Family

Slumping housing prices and ballooning gas and food prices have led many families to put the brakes on spending. Now Congress is set to make things worse for the American consumer by passing a $300 billion Farm Bill that will increase the cost of living for families and further burden taxpayers.

The 2002 Farm Bill was set to expire last October, but after a failure to compromise, Congress extended the bill. Now with the Memorial Day recess looming, Congress is working to pass a new Farm Bill so they can return to their districts, pockets overflowing with goodies for special interests.

The proposed five-year plan (no kidding) would increase subsidies for commodities like corn, soybeans, and wheat, boost spending on assistance programs like food banks and food stamps, and expand tax-credits for ethanol production.

Who benefits from this largess? The farm lobby likes to pretend the subsidies help preserve the small family farmer. But it’s clear that’s not the case.

According to one taxpayer rights group, 60 percent of today’s commodity subsidies provide payments to the wealthiest 10 percent of recipients – “corporate welfare for the rich” as it has been described. And while the new Farm Bill makes a gesture toward curbing these subsidies, it plans to add up to $26 billion in direct payments to mega-farms over the next five years.

This kind of agricultural policy continues to bias the market in favor of a few crops that lend themselves to large-scale production at the expense of other crops – namely fruits and vegetables. Subsidies that reward a select segment of the agriculture industry encourage consolidation. They make it easier for large farms and absentee landlords to raise rental prices and make it more difficult for small farmers to grow other crops.

By manipulating the market, the federal government makes it desirable for more farmers to produce a few items like corn, wheat, and soybeans. That leaves fewer farmers producing everything else – driving the supply of fruits and vegetables down and the price up. It’s a policy that ultimately hurts the consumer who will have fewer choices at the grocery store and will face the burden of higher prices.

It’s not just at the supermarket, however, where consumers will feel the pinch. Americans are likely to spend more at the gas pump thanks to the Farm Bill’s support for more ethanol production. While the existing tax-credit for corn-based ethanol will be trimmed by 6 cents a gallon, a new production tax-credit will be offered for cellulosic ethanol – a policy that will lead to even higher gas prices since mixing ethanol into gasoline supply reduces fuel economy.

President Bush has threatened to veto the bill, because it “has too much spending and not enough reform.” But this frustration is not limited to conservative, pro-taxpayer groups. The left-leaning international anti-hunger organization Oxfam released a similar statement claiming the bill continues to favor a “system that rewards those who need help the least.”

Even the reliably liberal Los Angeles Times editorial board supports Bush’s promised veto, in part because of the “accounting shenanigans” Congress is relying on to balance the books. With this bill, Congress takes another step toward abandoning even the pretense of a budget, as it is to exceed the spending limit by nearly $10 billion.

The 2008 Farm Bill will hurt Americans at every turn by inhibiting competition, limiting consumer choice, burdening individuals with higher food prices, and exacerbating the rising cost of fuel. During a period of economic uncertainty, American families need more spending flexibility, not less.

As is too often the case, however, Congress’s concern with special interests and political support trumps sound economic policy. If Congress really wants to bring something home to the American people this Memorial Day, they should go back to the drawing board and institute real reform to the Farm Bill.