CHICAGO -- Massachusetts Sen. Edward M. Kennedy is unhappy about the fat profits oil companies are making, and last week he called on the Justice Department and other federal agencies to investigate "illegal manipulation or cheating related to the current gasoline prices." He demanded that oil executives invest their profits in alternative fuels or new technologies or "expanding production in environmentally friendly ways." He warned, "We expect our consumers to be treated fairly."
Oops. My mistake. That wasn't Ted Kennedy. It was George W. Bush.
During the 2000 campaign, conservatives ridiculed Al Gore as a "Pander Bear" for his eagerness to toss principle aside in his shameless quest for votes. Lately, though, pandering has become a bipartisan endeavor. Faced with $3-a-gallon gasoline, the former West Texas oilman has shown he can do a fair impression of a bicycle-riding, granola-crunching, Birkenstock-wearing, corporation-bashing consumer activist.
At least Mr. Bush avoided the worst excesses of people in Congress, some of whom propose a windfall-profits tax on oil. They also want a bill to outlaw so-called gouging, which would be a clumsy form of price control. Democrats are so eager to exploit public discontent that they are even willing to adopt measures that have been calamitous failures.
A windfall-profits tax imposes a penalty for the sin of making farsighted investments. Oil companies spent money drilling holes in the ground in the 1990s even though there was a glut of oil that sent pump prices below $1 a gallon. The customary reward for doing that is to make money when the glut finally ends.
For Congress to confiscate a share of that return amounts to telling oil companies they should not have invested in production. Had they not made those investments, of course, there would be even less oil around today - and prices would be $4 or $5 a gallon instead of $3. A windfall-profits tax is a clever trick, if you want to make sure that gas prices never come down.
You don't have to take my word for it. President Jimmy Carter responded to the last energy crisis by getting Congress to enact a windfall-profits tax. A study by the Congressional Research Service found the tax reduced domestic oil output by at least 3 percent and boosted imports by 8 percent or more. We could run that experiment again, and I'm sure the Saudis would thank us.
