The worst possible 'solution' to the high cost of gasoline would be price controls, since they would simultaneously discourage production while driving 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- for 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 the public feels that is "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. 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.
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, shifting into Catch-22 mode, Gibson immediately followed that by criticizing big oil for reinvesting only $71 billion on capital investments last year while 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 spouting the conventional MSM wisdom of the week.