2006-09-08 / Columnists

It's My Turn

Why Bill O'Reilly Is Wrong: Oil Profits And 'Pitching In' During Wartime
By Mark Greenstein; Founder, New Democrats PAC

Mark Greenstein is a former Democrat Party challenger to Hillary Clinton. He has returned to civilian life as director of two education-oriented companies. He is the founder of The New Democrats, a PAC that supports politicians who advocate less federal government and more individual responsibility. The New Democrats also support citizen challengers to incumbents who have proved themselves irresponsible. This is his response to a televised statement made by commentator Bill O'Reilly on a recent show.

Your passion and your forthrightness is generally an asset to this country. Your judgment on 80% of the topics is keen, but your demand that oil companies reduce their gasoline prices is DANGEROUSLY off the mark.

Sure, oil companies can afford to reduce prices. Their costs have not risen as dramatically as the spot price of oil; they can make a profit with $35/barrel oil instead of $75/barrel. But no business, large or small, should have an obligation to take less. To argue that they are not good citizens if they don't reduce their profits is to argue that O'Reilly can do fine on $300,000 yearly salary instead of the $10,000,000+ he can command.

Bill, most corporations are OBLIGATED to maximize profit. Officers who willfully relinquish high profits invite class-action lawsuits for violating their fiduciary duty to stockholders. Unless there are "social responsibility" rules in a corporate charter, stockholders are the ONLY ones to whom corporate officers should be loyal.

Corporations are amoral AND SHOULD BE. They should raise revenue and drive down costs whenever they can. INDIVIDUALS, who can act morally, can then do what they want with the profits. The extra dividend every shareholder gets from a highly profitable company could be used to support firefighters, send more armor to troops abroad, or even buy a hybrid car. Let individuals make moral decisions using the money they earn from companies. To foist weighty moral decisions on public companies is to pervert a system that gives consumers what they want at prices they are willing to pay, and gives investors the best information about choices for saving and investing. If looking like a "good citizen" will raise revenue or cut long-term expenses, then the corporation should take that action. Keeping jobs in the U.S. despite cheaper labor abroad exemplifies the "good citizen" route that many officers know wins over more consumers.

Family-friendly work policies are another "good citizen" action that likely wins a more loyal and more talented set of workers. Cutting your gas price neither cuts neither expenses nor yields long-term good will.

Let's say Exxon chooses to take the risk of cutting prices. It might get two days of "nice" press, then the rest of the industry will follow suit; no one company will stand out as being more patriotic and all will have lower profit margins. Just look at the airlines: when one chooses to drop its price, the others follow suit and Americans harbor no lasting good will to the initiating airline.If high gasoline prices are irreparably hurting this country, it's the place of Congress to open up markets; if that can't be done quickly enough to meet a national emergency, then Congress should put us on a war footing.

For three reasons, your bloviating is dangerous here:

1) The culprit behind high gas line prices is the government. By limiting refining capacity, and by negotiating only with the largest oil companies, federal and state governments allow an abusive oligopoly. Were the government to lessen the barriers to entry, America would see a doubling of oil companies, selling oil at prices well below the windfall price we have now.

Free markets protect consumers. Right now we are at $3 - $4 per gallon gasoline because there is no incentive among the controlling oil companies to forgo the "risk premium" that has helped drive up the price. If a few more entrepreneurial companies entered the market, some would be willing to forgo that risk premium, and with it, ALL prices would fall. Your ire should be directed at Congressmen who are restricting the free market.

2) You are boycotting Exxon for being the best at what it does. But ALL the entrenched companies are keeping their prices equally high. Exxon's profits are the highest because they are the biggest, but they are acting the same way as every other company that is selling at the price it can command.

Indeed the one company that HAS voluntarily sold at below spot prices is Citgo, the state-run oil company of Hugo Chavez' Venezuela. Were Americans to follow O'Reilly and buy from the company that eschewed high profits, our money would be going to foment the revolutions that Chavez and other South American Marxists want.

3) This is an instance where you are painting yourSELF as a Marxist. You are railing against a company for high profitability. That is a liberal trend that will break the goodness of American capitalism. Public companies always deserve consumer scrutiny of their services, and government punishment if they violate laws. Public companies deserve consumer boycotts if their production practices cause harm. But no company deserves a boycott or government antipathy merely because it is successful. The oil companies give what people want at prices they are willing to pay. Bill, if you succeed in making consumers snarl at high profit margins, then we (or worse, the government) become obligated to help an unprofitable company that makes stupid decisions, sells things people don't want, or pays its top brass too much.

Marxism here brings us dangerously close to other "feel-good" proposals, like mandated minimum-wage hikes, but that is another economic blunder for another time.

Let INDIVIDUALS do social good. We do it best. Bill, if you want to steer consumers to oil companies that are doing good for America, encourage our fill-ups at companies that are environmentally decent and don't do business with the Middle Eastern sheikhs: Arco, Conoco, Hess, Phillips, Sinclair, Sunoco, and Valero. I for one am willing to pay MORE to any of these companies to support their staying steadfast against Mideast petroleum. Domestic production, North Sea Production, and even Russian production deserve our support. Consumer dollars that go to the Mideast help those regimes support vile madrassas, arms sales, and international terrorism. Every dollar we spend with Amoco, Chevron, Exxon, Marathon, Mobil, Shell and Texaco* sends money to people who are trying to kill me, my family, and you.

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