Posted on 05/08/2006 5:36:03 AM PDT by governsleastgovernsbest
by Mark Finkelstein
May 8, 2006
The worst possible 'solution' to the high cost of gasoline would be price controls, since they would simultaneously drive down production and drive up demand. But running a close second and third in the bad-idea sweepstakes would be a windfall-profits tax on oil companies and a cap on the amount oil companies can pay their executives. Two out of three ain't bad, so let's give GMA's Charlie Gibson an A- in his attempt to demagogue the gas-price issue this morning.
His guest was the soft-spoken James Mulva, Chairman and CEO of ConocoPhillips, the nation's third-largest oil company.
Gibson opening shot was to suggest that "consumers have a right to be angry" in light of the estimated $135 billion the six largest oil companies are expected to make in 2006. Gibson didn't attempt to suggest why high profits justify consumer anger. Remember, market economics dictate that sellers price their products at the level yielding the highest profits, not necessarily at the highest possible price. Consider Wal-Mart, for example, which has reaped huge profits by consistently offering prices lower than those of competitors.
Mulva sensibly explained that the high prices and profits and largely due to crude in the $70-75 range and refining capacity issues. Gibson wouldn't be placated, citing the factoid that the $135 billion in profits is larger than the GDP of Israel and suggesting that the public says "isn't that an obscene amount?" Hey, I'm sure the oil companies would be willing to purchase Israel, but there's no oil there.
GMA employed the same device used by the Today show in its recent interview of Exxon-Mobil CEO Rex Tillerson, collecting viewer questions to put to the respective guests. Of course, since GMA and Today get to choose which viewer questions to pose to guests, the exercise is little more than convenient cover for putting the MSM's own opinions in the mouths of others.
In this case, Gibson passed along one of those viewer questions regarding oil industry profits: "at some point isn't enough, enough?"
Gibson scoffed at Mulva's point that while his company had made $3.3 billion in the first quarter, it had actually reinvested $4.6 billion into adding to production and capacity of our refineries. "Isn't that a cost of doing business?", sniffed Gibson. But then, immediately shifting into Catch-22 mode, Gibson immediately followed that by criticizing big oil for reinvesting only $71 billion on capital investments last year, but spending $74 billion on dividends and stock buy-backs.
"Sounds to me like you have a greater responsibility to shareholders, than to consumers to reinvest." I wish Mulva had told the truth - that a corporation's only real responsibility, other than obeying the law, is to shareholders. Consumers and others benefit through the operation of Adam Smith's 'invisible hand,' the enlightened self-interest that drives corporations to provide products people want at prices they're willing to pay. Mulva didn't really challenge Gibson's depiction of corporations as akin to social service agencies.
Gibson continued to use the pretext of viewer questions to express what surely lurks in MSM hearts: "One of those people that [GMA talked to] in the public said 'is there any sacrifice that Big Oil can make?' The public looks at this and 'says what's unreasonable about a windfall profits tax right now?'"
Mulva: "We've tried that, countries have tried it. It doesn't work. You put in price controls it holds down the price but increases consumption which is not good. Windfall profits tax takes away from the ability of the companies to reinvest, to grow and add to capacity."
Now on his populist roll, Gibson continued: "One of the things that the public gets upset about is as you know, CEO compensation. We just had the CEO of Exxon-Mobil retire and he had a $400 million package. Your compensation is $13 million a year with extraordinary amounts of stock options that can eventually be exercised. When the public talks about sacrifice yes, it might be a token sacrifice, but should there be a cap on those kinds of compensations?"
Answered Mulva: "With respect to CEO compensation obviously these are very, very large numbers but on the other hand, if you look at the oil companies, the international oil companies there are huge responsibilities with respect to asset bases and hundreds of billions of dollars. We have tens of thousands of employees so there is a great deal of responsibilities."
A better answer might have been that if there are going to be solutions to the energy challenges we face, it is going to take the best and the brightest executives to find them. If you cap oil industry compensation, the ablest execs will take their skills to other industries where they can earn what the market says they are worth.
In any case, Gibson didn't explain why $13 million is too much for the head of a company responsible for tens of thousands of employees and hundreds of billions in assets, but $7 million is apparently just fine for a guy with no responsibilities other than to sit in a comfy New York studio doling out MSM conventional wisdom.
The Exxon-Mobil Exec's $400 mil compensation package was accrued over a period of several years. Now, let's say he wanted to give all that money back to the American public.
That figures out to less than $2.00 per person.
Viewed that way, it doesn't seem like the $400 mil has much effect on the price of gas.
You watch so we don't have to. I appreciate that!
You watch so we don't have to. I appreciate that!
Dang!
Good point. I'm curious as to the price rise of my cable bill versus gas prices over the last decade or so. Anyone know of any research?
That actually happened about 100 years ago with J.P. Morgan. Some average Joe wrote him and said he was too rich and he should share his wealth with all Americans. So, J.P. actually sent him a check for about a dollar or so, with a note saying.."OK, here is your share".
True story!
I'd like to stress what a fraud it is for GMA to use 'viewer questions.' Since GMA gets to choose which viewer questions to pose to guests, the exercise is little more than convenient cover for putting the MSM's own opinions in the mouths of others.
Consider that Gibson could surely have found viewer questions along the lines 'how much have consumers been hurt by restrictions on drilling in ANWR and the continental shelf?" But Charlie only picked questions that gave voice to the MSM's penchant for bashing the free-market system.
And I'm sure we don't pay you enough to sit and watch that shlock. Now, where's my checkbook?
Or when I hear a MSM reporter pose a question with the qualifier 'some say'.
I love this part... the moment in every local newscast where they drag us out to a local gas station and get some moron to whine and cry about high gas prices. It's always some toothless hick who has no clue how a free-enterprise market works. "Well I think it's ridiculous... Someone needs to do something about this." He tells this sob story as he is gassing up his big Ford F-250 that probably gets 19 miles a gallon on a good day. And what makes this scene hilarious is they always go to a place like the one single gas station in downtown Dallas where gas is $3.59 a gallon, but costs $2.89 everywhere else within 60 miles. Hey, Bubba... you deserve to get ripped off if you're that stupid. The price of a barrel of oil has exceeded your IQ.
The news media then explains how families are being "gouged". These are the same families that have no problem buying a bucket of KFC chicken for $23.99 on the way home from soccer practice, driving their 17 MPG SUV in heavy stop-and-go traffic with the a/c running full blast, drinking their $5 Starbucks cappucino. But ask them to pay an extra $10 a week for the convenience of fast, safe travel and they howl and wail and gnash their teeth like a Muslim reading the comics.
"Honey, i was just channel surfing when you happened to walk in during that soft-core porn movie on Cinemax! Honest, I was looking for the baseball game!"
Please send your check, or click on PayPal, to contribute to the Governsleastgovernsbest New Car Fund ;-)
The whole talking head business should be outsourced. Why pay an airhead like Katie 17 million when you could get some educated Indian lady for 50 grand a year?
The only reason to have a news reader on the tube is for the blind. It drives me nuts, just have written reports scrolling down the screen, and I could get all the news in a few minutes instead of an hour.
Charlie must have missed that lesson in business. Also, I'm sure he wants all the companies that he owns stock in to totally ignore their shareholders and just make the consumers happy. Why just yesterday I read Apple is going to start giving iPods away and that ABC will be charging advertisers nothing to air their commercials!
A coke was 5 cent when I was a kid. We raised cane when they went to 6 cent.
"He tells this sob story as he is gassing up his big Ford F-250 that probably gets 19 miles a gallon on a good day. "
I would love to get 19 mpg. I get 14 in the city with my jeep grand cherokee with the high output V8 engine. Then again I am a rich evil conservative who can afford it. Usually I never turn off the engine, I just leave it idle all day. To fight global warming I just leave the window open and keep the AC on, and the envirowackos still complain.
When is Charlie Gibson going to rag out the executives of automobile manufacturing companies? The cost of an average new automobile has far outpaced inflation and even the price of oil over the past 25 years.
I was just waiting for the Seinfeld comment.
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