Following up on what The Monk himself noted yesterday, here's a fine piece by the National Review editorial board ripping the Republican Congress for its idiocy on the "overpriced" oil issue.
The truth is that today’s high gas prices have almost nothing to do with profit margins on oil, and that the “solutions” being batted around — windfall taxes, price controls, anti-gouging laws — would do much more harm than good.
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. . . In a recent Cato Institute study, Jerry Taylor and Peter Van Doren reviewed the data and found that profit margins in the oil industry are comparable to those of other sectors. What’s more, the oil and gas sectors have actually been less profitable from 1970 to the present than the rest of the economy. Slapping a “windfall tax” on them now would amount to telling them that they must suffer losses during lean years but can’t make up for them in fatter ones.
That’s unfair, of course, but it’s also bad policy. What it would do — as would price controls — is distort economic incentives in such a way as to decrease domestic oil production. Oil companies are willing to make the huge capital investments associated with exploration and drilling because they have a reasonable expectation that the market will reward them. Diminish that expectation and you also diminish the amount of oil flowing from U.S.-owned wells. This isn’t just theory; it’s precisely what has happened whenever lawmakers have meddled in energy markets. Harvard economist Joseph Kalt found that price controls in place from 1974 to 1980 kept domestic production 0.3 to 1.4 million barrels per day lower than it otherwise would have been, and the Congressional Research Service estimates that the windfall tax on oil profits from 1980 to 1988 decreased domestic production by 3 to 6 percent.
Read the whole thing, but honestly The Monk said the same thing a day earlier here.