Another Congressional Show Trial

The heads of so-called “Big Oil” were brought before yet another Stalinist tribunal Congressional Committee today and asked to explain how they could commit the unpardonable sin of making a profit:

WASHINGTON — Top executives of the five biggest U.S. oil companies said Tuesday they know high fuel prices are hurting consumers, but deflected any blame and argued their profits _ $123 billion last year _ were in line with other industries.

“On April Fool’s Day, the biggest joke of all is being played on American families by Big Oil,” said Rep. Edward Markey, D-Mass., as his committee began hearing from the oil company executives.

Lawmakers were looking for answers to the soaring fuel costs a day after the Energy Department said the national average price of gasoline reached a record $3.29 cents a gallon and global oil prices remained above $100 a barrel although supplies of both gasoline and oil seemed to be adequate.

“I heard what you are hearing,” John Hofmeister, president of Shell Oil Co., told Markey, adding in prepared testimony that he knows that “Americans are worried about the rising price of energy…. These cost increases are hitting consumers hard, particularly the poor and those on fixed incomes.”

But neither Hofmeister nor the executives from Exxon Mobil Corp., BP America Inc., Chevron Corp., and ConocoPhillips said their companies should be blamed and they rejected the notion that their profits are extreme.

“Our earnings, though high in absolute terms, need to be viewed in the context of the scale and cyclical, long-term nature of our industry as well as the huge investment requirements,” said J.S. Simon, Exxon Mobil’s senior vice president. Last year the oil and gas industry earned 8.3 cents per dollar of sales, only a little higher than the Dow Jones Industrial Average for major industries, he argued in prepared testimony.

In other words, the marginal profit of Exxon Mobil or any of the other oil companies isn’t any different, on average, from any other major industry. There are no “windfall” profits. There is no price “gouging.” Yes, profits are higher in relative terms, but that’s because in relative terms the price of the chief commodity used in the production of gasoline, crude oil, was recently higher than it has ever been, even when adjusted for inflation.

In order to understand that, of course, you have to understand economics, which is the one thing that the demagogues on Capitol Hill don’t understand:

Markey challenged the executives to pledge to invest 10 percent of their profits to develop renewable energy and give up $18 billion in tax breaks over 10 years so money could be funneled to support other energy and conservation.

But who, Congressman Markey, is supposed to decide which alternative energy projects are the most promising ? Isn’t that something we’ve always left up to the market.

There’s nothing wrong with making a profit, and that’s all the oil companies have done. Until Congressman Markey and his henchman can point to a similar contribution they have made to the productive capacity of the entire planet, they should just shut up.