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Jewish World Review June 19, 2008 / 16 Sivan 5768 McCain's talk of ‘sharing’ oil profits should disturb voters By E. Thomas McClanahan
http://www.JewishWorldReview.com | During his long career, Sen. John McCain has found all sorts of ways to drive Republicans nuts. He did it again the other day with a couple of pratfalls on NBC's "Today Show." First he said he didn't think fuel prices would be coming down between now and the November election. Fair enough, but he added that the reason was that "you've got a finite supply (of oil), basically, and a cartel controlling it." Then came some weird musings on oil companies, and how they should "absolutely" share some of their profits with consumers. "The point is, oil companies have got to be more participatory in alternate energy, in sharing their profits in a variety of ways, and there is a very strong and justifiable emotion about their profits," he said. Oh, my. Exactly what did he mean by sharing? How would such a thing be accomplished - through some government program? And his remark about "justifiable" emotions caused by profits is pretty revealing, and not the sort of thing likely to endear himself to economic conservatives. In times of scarcity, you want the providers of essential commodities to make hefty profits. It draws in more potential suppliers. How else does he expect the problem to be corrected? McCain's record on allowing more drilling for oil is spotty at best. You'd think that at some point in his mental wanderings he'd be more aggressive in pressing for additional domestic drilling, such as on the outer continental shelf, with reserves of up to 85 billion barrels of oil. He has opposed drilling in the Arctic National Wildlife Refuge. Which brings us to his remark about "finite" oil supplies. Natural resource accounting can seem confusing at first. That's because it's entirely possible to keep using stuff without running out, while ending up with more than when you started. What matters is the amount of effective stocks, or reserves, of whatever resource you're talking about. Technological advances can both improve our ability to get more of a given resource and improve the efficiency of how it's used. Examples: deeper drilling for oil, and better gas mileage in cars. Technology can boost how much a resource contributes to economic growth, a factor called "output contribution." As the Fortune Encyclopedia of Economics notes, if a scientific breakthrough boosts the output contribution of a resource greater than the amount that is used in a year, then "in terms of human economic welfare, the stock of that resource will be larger at the end of the year than at the beginning." Even though the absolute quantity may decline, the resource "need never be exhausted completely, and its effective quantity can rise for the indefinite future." In 1950 world aluminum reserves were computed at 1.4 billion metric tons. Over the next 30 years, 1.3 billion metric tons were produced. So, we nearly ran out of aluminum, right? Wrong. In 1980, world aluminum reserves were computed at 5.2 billion. So resigning ourselves to "finite" oil supplies is defeatist. Yes, by all means continue the effort to discover alternative energy sources, but in the here and now, with the American people facing the ratcheting tax of higher fuel prices, supply matters. McCain is doing little to promote efforts to boost supply. Rather, he's given aid and comfort to those who would blame the oil companies for our problems and seek to tax their "excess" profits - a proposal that would only worsen our supply problem by penalizing companies for delivering what we need: oil. This is going to be an interesting election, because each candidate is likely to spend a certain amount of time in the doghouse with his political base. Barack Obama will try to tack to the center, and in doing so he will anger the hard left. For example, he recently named Jason Furman, a centrist, as his top economic adviser. That drew a blast from activists and union leaders, who see Furman as too much a fan of globalization. McCain will anger his base because he's McCain. He simply can't help himself. He's the better choice on economic policy generally: He favors lower taxes, less government spending and free trade. But I wonder: How many Republicans already lukewarm toward McCain went cold on hearing his lefty rhetoric about "sharing" profits? Every weekday JewishWorldReview.com publishes what many in in the media and Washington consider "must-reading". Sign up for the daily JWR update. It's free. Just click here.
E. Thomas McClanahan is a member of the Kansas City Star editorial board. Comment by clicking here.
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Arnold Ahlert | |||||||||
