The Assault on Energy Producers - The Objective Standard

“We’ve got to go after the oil companies,” says President-elect Barack Obama in response to high oil and gasoline prices. “We’ve got to go after [their] windfall profits.”1 Explaining the purpose of recently proposed energy legislation, Senate Majority Leader Harry Reid says: “We are forcing oil companies to change their ways. We will hold them accountable for unconscionable price-gouging and force them to invest in renewable energy or pay a price for refusing to do so.”2 Calling for government seizure of private power plants, California Senate Leader John Burton insists: “We have to do something. These people have got us by the throat. They’re making more money than God, and we’ve got to fight back—not with words, but with actions.”3

 

This attitude toward energy producers, which is practically unanimous among American politicians today, is wreaking havoc not only on the lives and rights of these producers, but on the lives and rights of Americans in general. It leads to laws and regulations that prohibit producers and consumers from acting on their rational judgment with respect to energy. It causes energy shortages, brownouts, and blackouts that thwart everyone’s ability to be productive and enjoy life. And it results in higher prices not only for energy, but for every good and service that depends on energy—which means every good and service in the marketplace, from food to transportation to medical care to sporting events to education to housing.

Energy producers, like all rational businessmen, are in business to make money. Profits are what motivate them to exert the requisite brain power, to engage in the necessary research, and to invest the massive amounts of money required to produce and deliver the energy we need to light, heat, and cool our homes, and to power the factories, workplaces, and tools required to produce the goods on which our lives depend. Their profit motive is to our benefit.

Moreover, energy producers, like all human beings, have a moral right to act according to their own judgment so long as they do not violate the rights of others. They have a moral right to use and dispose of the product of their effort as they see fit. They have a moral right to contract with customers by mutual consent to mutual benefit. In other words, they have a moral right to life, liberty, property, and the pursuit of happiness. And it is only by respecting these rights that we can expect energy producers to produce energy.

So let us examine the assault on these producers, count the ways in which this assault is both impractical and immoral, and specify what must be done to rectify this injustice. . . .

Endnotes

Acknowledgments: I thank Craig Biddle and Alan Germani for their extensive work on this article. I also thank Alex Epstein, Annaliese Cassarino, and Jim Brown for helpful comments on earlier versions of the essay.

1 Mike Dorning and Rick Pearson, “Candidates Rev Up Rhetoric Over Gas Tax, Obama Rapped for Opposing ‘Quick Fix,’” Chicago Tribune, April 29, 2008, http://archives.chicagotribune.com/2008/apr/29/news/chi-campaign_tuesapr29.

2 Democrats.Senate.Gov, “Democratic Senators Unveil Consumer-First Energy Act Of 2008,” May 7, 2008, http://democrats.senate.gov/newsroom/record.cfm?id=297375.

3 Bernadette Tansey, “Power Grab—Some Democrats Favor Seizing Plants,” San Francisco Chronicle, Monday, April 9, 2001, http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/04/09/MN122655.DTL.

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4 Energy Information Administration, “Analysis of Crude Oil Production in the Arctic National Wildlife Refuge,” May 2008, http://www.eia.doe.gov/oiaf/servicerpt/anwr/pdf/sroiaf(2008)03.pdf. The values given are peak estimates.

5 On U.S. refinery capacity and for examples of regulations, see the following articles from Oil & Gas Journal: David N. Nakamura, “U.S. Refining: A History,” vol. 101, no. 31, August 11, 2003, p. 15; Nick Snow, “NPRA’s Timely Capacity Tally,” vol. 103, no. 27, July 18, 2005, p. 29; “Attention to Refining,” vol. 103, no. 36, September 26, 2005, p. 21; Nick Snow, “Industry Groups Reply to Anger Over Gasoline Prices,” vol. 104, no. 18, May 8, 2006, p. 27; and Nick Snow, “U.S. Refining on Tightrope,” vol. 104, no. 29, August 7, 2006, p. 26. For more examples of regulations, see Stephen J. Glain and Peter J. Howe, “Clean-Air Rules Fuel Gas Run-Up,” Boston Globe, May 20, 2004. For examples of lawsuits by the EPA, see James Temple, “Refineries Upgrade Local Facilities,” Contra Costa Times, June 17, 2005.

6 “Attention to Refining” and Nakamura, “U.S. Refining.”

7 Elizabeth Allen, “San Antonio-Based Refiners Defend Clean-Air Additive that Pollutes Water,” San Antonio Express-News, December 3, 2003, p. 1E.

8 On taxes, see American Petroleum Institute, “Motor Fuel Taxes, Summary Report,” January 2008, http://www.api.org/statistics/fueltaxes/index.cfm. For the current price of gasoline, see American Automobile Association, “Daily Fuel Gauge Report,” http://www.fuelgaugereport.com/. The price I used was from November 23, 2008.

9 On imports, see the Energy Information Administration, http://tonto.eia.doe.gov/country/index.cfm. On proven reserves, see David R. Mares and Nelson Altamirano, Venezuela’s PDVSA and World Energy Markets: Corporate Strategies and Political Factors Determining Its Behavior and Influence, March 2007, http://www.rice.edu/energy/publications/docs/NOCs/Papers/NOC_PDVSA_Mares-Altamirano.pdf.

10 David Isaac, “California’s Recipe For Energy Crisis: When Demand Booms, Forget Supply,” Investor’s Business Daily, January 22, 2001, p. A28.

11 Mike Stuckey, “Nuclear Power ‘Wave’—or Just a Ripple?” January 22, 2007, http://www.msnbc.msn.com/id/16272910/from/ET/.

12 Dixy Lee Ray, “Radiation Around Us,” in Rational Readings on Environmental Concerns, edited by Jay H. Lehr (New York: Van Nostrand Reinhold, 1992), pp. 589–603.

13 On Chernobyl, see NucNet, “Chernobyl Fact File,” February 2006, http://www.neimagazine.com/journals/Power/NEI/April_2006/attachments/NucNetChernobylFactFile.pdf and Scott Peterson, “Chernobyl Closes, Legacy Endures,” Christian Science Monitor, vol. 93, no. 11, December 8, 2000.

14 Molly M. Pohl, “Bringing Down Our Dams: Trends in American Dam Removal Rationales,” Journal of the American Water Resources Association, vol. 38, no. 6, December 2002, pp. 1511–1519.

15 Ken Silverstein, “Clean Air Clarity May Come,” EnergyBiz Insider, August 30, 2006, http://www.energycentral.com/centers/energybiz/ebi_detail.cfm?id=200; “Supreme Court Reverses Fourth Circuit in Duke Energy Corp.,” April 4, 2007, http://www.bdlaw.com/news-152.html; and Lara Jakes Jordan, “Settlement Reached in Acid Rain Case,” San Francisco Chronicle, October 9, 2007, http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/10/09/national/w000743D95.DTL.

16 Interview with the San Francisco Chronicle, January 2008, http://www.youtube.com/watch?v=Hdi4onAQBWQ.

17 Nancy Vogel, “How State’s Consumers Lost with Electricity Deregulation,” Los Angeles Times, December 9, 2000, p. A1; and Jack Wakeland, “California’s Green Brownout, Part 1,” Intellectual Activist, vol. 15, no. 3, March 2001, pp. 24–29.

18 Charles Oliver, “California’s Home-Bred Energy Crisis: Blame Government, Not Deregulation,” Investor’s Business Daily, January 8, 2001, http://www.investors.com/editorial/editorialcontent.asp?secid=1501&status=article&id=160127&secure=5670.

19 California electricity production capacity data were obtained from the State Electricity Profiles of the U.S. Department of Energy’s Energy Information Administration at http://www.eia.doe.gov/cneaf/electricity/st_profiles/backissues.html. Electricity consumption data were obtained from the California Energy Commission at http://www.energy.ca.gov/electricity/consumption_by_sector.html.

20 Of course, power producers and distributors were alleged to have dishonestly manipulated supplies and prices in California. Although some companies, such as Enron, engaged in dishonesty, many of the trading tactics criticized by government officials, the media, and the public were legal methods used by companies to circumvent government controls. In fact, most—if not all—of the tactics of power companies that have been criticized were made possible only by the regulations created during California’s “deregulation” of its electricity market. For a detailed discussion of some of the trading tactics made possible by California’s “deregulation” of its electricity market, see Jack Wakeland, “The Electricity Papers,” Intellectual Activist, vol. 16, no. 6, June 2002, pp. 23–28.

21 The discussion on natural resources is based in part on George Reisman, Capitalism: A Treatise on Economics (Ottawa, IL: Jameson Books, 1996), pp. 63–67.

22 Cambridge Energy Research Associates, “Peak Oil Theory—‘World Running Out of Oil Soon’—Is Faulty; Could Distort Policy & Energy Debate,” November 14, 2006, http://www.cera.com/aspx/cda/public1/news/pressReleases/pressReleaseDetails.aspx?CID=8444.

23 Bjorn Lomborg, The Skeptical Environmentalist: Measuring the Real State of the World (Cambridge: Cambridge University Press, 2001), pp. 122–129.

24 Ayn Rand, Return of the Primitive (New York: Penguin, 1998), p. 167.

25 For an example from Great Britain’s history of how air quality has improved due to industrialization, see Lomborg, Skeptical Environmentalist, pp. 164–165 and 170.

26 John Emsley, ed., The Global Warming Debate (London: The European Science and Environment Forum, 1996), pp. 215–232; Arthur B. Robinson et al., “Environmental Effects of Increased Atmospheric Carbon Dioxide,” January 1998, http://www.oism.org/pproject/s33p36.htm; and S. Fred Singer and Dennis T. Avery, Unstoppable Global Warming: Every 1,500 Years (Lanham, MD: Rowman & Littlefield Publishers, Inc., 2007), pp. 7–9. For my own assessment of global warming, see Brian P. Simpson, Markets Don’t Fail! (Lanham, MD: Lexington Books, 2005), pp. 148–151.

27 My discussion of the nature of environmentalism is based on Simpson, Markets Don’t Fail!, pp. 143–146.

28 David M. Graber, “Mother Nature as a Hothouse Flower,” Los Angeles Times Book Review, October 22, 1989, p. 1.

29 Alaska Wilderness League, “Despite Congressional Opposition, Bush Budget Features $1.2 Billion From Arctic Refuge Oil Leasing,” The Arctic Truth, vol. 1, no. 43, April 9, 2001.

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