Last week Speaker Nancy Pelosi (D-CA) sent a letter to President Bush on Earth Day identifying three pieces of energy legislation that she claims will “save Americans money.” One bill is actually a decent idea, but has no hope of lowering energy prices anytime soon. Another bill could marginally increase gas prices by creating vague legal standards that will drive up litigation costs. But the only major legislation identified would be a complete disaster for American consumers.
First the good: Speaker Pelosi urges action on the No Oil Producing and Exporting Cartels (NOPEC) Act. The bill would allow the federal government to sue the Organization for Petroleum Exporting States (OPEC) for antitrust violations by amending the Foreign Sovereign Immunities Act. Heritage actually believes suing OPEC is a good idea. The problem is a successful suit would take years to prosecute and if the government did ever come close to winning, offending foreign governments would just remove their assets from the U.S. making enforcement of a ruling impossible. In other words, this is just a feel good measure that will not help a single consumer.
The bad: Speaker Pelosi also urges action on the Energy Price Gouging Act which she claims would offer American families “immediate relief” by empowering the FTC to investigate and punish people who “artificially inflate the price of energy.” Never mind that the U.S. already has perfectly functional anti-trust laws forbid oil companies from engaging in monopolistic practices that could raise prices. Never mind that there is no way that an investigation could bring “immediate relief” to American families. No, listen to the FTC itself on why the legislation would be harmful: “Our examination of the federal gasoline price gouging legislation that has been introduced…indicates that the offense of price gouging is difficult to define. …the lack of consensus on which conduct should be prohibited could yield a federal statute that would leave businesses with little guidance on how to comply and would run counter to consumers’ best interest.”
The ugly: The worst idea in Speaker Pelosi’s letter is the Renewable Energy and Energy Conservation Tax Act of 2008. The bill makes several tax code changes that would end up raising the taxes paid by companies that produce domestic oil and natural gas. Pelosi calls the current tax code “subsidiz[ing] Big Oil” but the average effective tax rate for major oil companies is actually higher than the market as a whole. Raising taxes on the companies that produce oil domestically will only reduce supplies and increase prices for consumers in the years ahead. This bill promises to “invest” the money from increased taxes into new tax breaks for alternative fuels. First note that that the tax breaks Pelosi wants to repeal for “Big Oil” are labeled subsidies while the tax breaks for equally big companies pursuing alternative fuels magically become “investments.” Second, according to the Energy Information Administration the overall percentage of electricity from renewable sources is not expected to increase until 2030. Finally, some of the alternatives, like ethanol, have been subsidized for almost 30 years and still are not yet profitable.
Bottom line, Speaker Pelosi’s energy policy prescriptions are either complete fantasies are will definitely raise energy prices. But then again, maybe Pelosi does not want to lower gas prices after all.