CANDIDATES RUSH TO rescue oil companies: “With the price of petroleum having fallen from almost $150 per barrel last summer to about $81, the campaigns of both Barack Obama and John McCain rushed to outline their respective plans to rescue beleaguered oil companies from nose-diving profits and earnings.” Heh. It’s about time!
No offense to Glenn but the people working in the oil fields aren’t laughing.
Most people outside the oil states forget that hundreds of thousands of middle-class people work directly in the oil industry, either for big companies or for the multitude of medium and small firms that provide a wide range of services. Millions more depend on the industry indirectly. High oil prices don’t just mean good times for big investors, they means jobs for all the people who turn gloop in the ground into everything from medicine to a road trip down Route 66.
Everyone who wants to stick it to the oil companies sticks it to the little people as well. In the 1970s, during the heart of the energy crisis, oil profits remained low due first to price controls and then to (Obama’s favorite) windfall-profits taxes. Incredibly, at the same time that OPEC savaged the world economy and oil revenue made the Soviet Union prosperous and aggressive, leftists made it unprofitable to hire Americans to pump oil from American soil.
When Reagan did away with the windfall-profits tax, the oil fields bloomed and imports declined. For a period of four years, times were sweet. Everyone had a job. Then the free market did its job and broke the OPEC cartel, and within a period of less than 9 months oil dropped 60%. It was morning in America everywhere else, but the oil field states suffered the equivalent of a localized depression. Small towns all but died. Major cities had “ghost malls” — i.e., long strips of completely empty retail space. 80% of oil related businesses in Texas (including President Bush’s company) failed.
No one at the national level lifted a finger to help or even appeared to notice. Pundits agonized about the rustbelt but roughnecks could just go hang. The oil states gritted their teeth, adapted and by the early ’90s came out stronger and more economically diverse than before. All without help from anyone.
None of this is to say that low energy prices are not a good thing overall. However, the oil industry runs in boom-and-bust cycles. The money that individuals and companies make during boom years tides them over in the bust years. People who only notice the oil industry at the height of booms should remember that.