Authored by Robert Rapier via OilPrice.com,

• Republicans and Democrats both have misconceptions about the energy sector, with the former often downplaying climate change and the latter misunderstanding oil industry operations.

• Oil prices are determined by global supply and demand, not by individual oil companies; thus, claims of oil companies causing inflation or gouging prices are misplaced.

• Implementing policies like windfall profits taxes on oil companies doesn't address the root issues of supply and demand, and it's essential for policymakers to have a comprehensive understanding of the energy sector for effective governance.

Good energy policy starts with a good understanding of energy issues. But both major political parties have glaring blind spots when it comes to understanding the energy sector.

Let me preface this column by noting that I am a registered Independent. I have major disagreements with both political parties, and I strive to approach issues from a completely objective viewpoint.

I think Republicans get it mostly wrong when it comes to climate change, and the importance of transitioning to alternative energy. But they seem to understand the current critical role of fossil fuels in the economy, and they mostly get it right when it comes to supporting nuclear power.

Democrats never seem to understand how the oil industry works. For example, look at the list of Democrats who signed onto the “Big Oil Windfall Profits Tax” introduced last year by Senator Sheldon Whitehouse (D-RI). In announcing the bill, Senator Whitehouse said it would “curb profiteering by oil companies and provide Americans relief at the gas pump.”

The bill was cosponsored by Senators Jeff Merkley (D-OR), Elizabeth Warren (D-MA), Bernie Sanders (I-VT), Richard Blumenthal (D-CT), Tammy Baldwin (D-WI), Sherrod Brown (D-OH), Jack Reed (D-RI), Ed Markey (D-MA), Cory Booker (D-NJ), Michael Bennet (D-CO), and Bob Casey (D-PA). Congressman Ro Khanna (D-CA-17) introduced the legislation in the U.S. House of Representatives.

In addition to claims of price gouging, this same cast of characters has sometimes blamed oil company profits for inflation.

Here’s Senator Bernie Sanders doing that.

These politicians do not seem to understand that oil companies don’t control prices. Oil is the world’s most valuable commodity. Oil prices are set by buyers and sellers in global markets, based on supply and demand expectations.

Firms like ExxonMobil produce such a small share of the world’s oil they couldn’t move prices much if they wanted to. They benefit from high prices, but don’t set those prices. If they did, prices would never fall.

Saying profits cause inflation confuses cause and effect. It’s like saying hospitalizations cause car crashes. It is true that a car crash can result in hospitalization, but hospitalizations do not cause car crashes. If you believe the latter — and you try to address the problem by focusing on the hospital — you are working on the wrong problem.

Likewise, high profits in the oil industry and inflation are both caused by high oil prices. But high oil prices are caused by supply and demand factors.

Outside of rare circumstances, it’s impossible for oil companies to gouge you, because they don’t set the price. An example of true price gouging would be if a local gas station that sets its own prices doubled them when supply is ample. But Chevron earning more from high global prices set by markets is normal capitalism. That’s how the entire global commodity markets work.

I can only imagine that in the minds of some politicians, executives of Big Oil are meeting in smoke-filled boardrooms, rubbing their greedy hands together, and deciding to raise prices because Russia invaded Ukraine. But that’s not how any of this works.

If politicians want to address oil prices, they need to address the supply side and the demand side. When politicians propose windfall profits taxes on oil companies, intending to give rebates to consumers, it might sound good, but it doesn’t address the core issue.

High prices should signal consumers to use less energy, but rebates would diminish the price signal — which wouldn’t alleviate pressure on demand. On the supply side, punitive taxes on oil companies might sound appealing, but that’s less money that can be allocated to projects, which affects future supplies. Former Venezuelan president Hugo Chávez learned this lesson the hard way, and Venezuela is still paying the price.

Some have expressed outrage that oil companies are using record profits to buy back shares or pay special dividends to shareholders. But it’s common for companies, not just in the oil industry, to buy back shares or pay dividends when profits are high. It’s a part of how our capitalist system works. If companies can issue shares, they should be able to buy them back.

For consumers worried about high oil prices, there are options. You can invest in an oil company. Thus, when oil prices rise, so do your shares. Or consider switching to an electric vehicle to reduce your reliance on fossil fuels.

In conclusion, understanding energy issues is crucial for effective policymaking, yet both major political parties often exhibit significant misunderstandings of the energy sector. By understanding the complexities of the energy sector, policymakers and consumers alike can make informed decisions that contribute to a more sustainable and economically sound future.

2024 Republican presidential candidate Ron DeSantis has taken his pursuit of the pro-Israel vote to a new extreme by facilitating the shipment of weapons, ammunition and military gear. 

In an ongoing spectacle that would repel Washington and Jefferson, DeSantis and fellow presidential hopeful Nikki Haley have been locked in a contest over who can demonstrate the most intense loyalty to a foreign country - Israel. 

While Haley is limited to warmongering, interventionist rhetoric, DeSantis' status as a standing governor gives him opportunities for executive action.

“This isn’t just an attack on Israel. This is an attack on America”

- Nikki Haley pic.twitter.com/eNeicI6Ai0

— HOT SPOT (@HotSpotHotSpot) October 9, 2023

Having already arranged flights to evacuate 700 Americans from war- and terrorism-shaken Israel, DeSantis on Thursday announced that the state of Florida has used cargo planes to send drones, body armor and helmets to Israel -- and that he's also facilitated the shipment of guns and ammunition that were privately purchased.  

Right out of the gate, details of DeSantis's announcement were challenged by an Israeli official. The governor's office claimed that DeSantis had acted in accordance with a request from Israel's Miami consulate. However, Major Elbaz-Starinsky, the consul general in Miami, said that was false. 

“Nothing went through me,” Elbaz-Starinsky told Associated Press. “We were never in communication on any shipments of arms or ammunition. The only thing that I have dealt with sending is medical supplies.” Confronted with Elbaz-Starinsky's questioning of the narrative, Florida governor spokesman Jeremy Redfern only reiterated that DeSantis's office was contacted by the consul-general. 

The governor's office hasn't said if DeSantis had coordinated his action with the White House. The export of ammunition and various types of military gear -- including body armor -- are subject to federal export controls. 

 “There are laws and regulations which govern how the export process is handled and that’s all done through Commerce," said National Security Council spokesman John Kirby.

"I couldn’t speak with authority today about whether the governor has checked all those boxes or not.”

The DeSantis announcement comes on the eve of the Republican Jewish Coalition's Annual Leadership Summit in Las Vegas, which DeSantis and all other notable GOP primary candidates are expected to attend. 

In a bold counter to the Biden administration's semiconductor restrictions aimed at curtailing China's development of sophisticated chips for potential military use, Huawei Technologies Co. struck back with a bang in late August, unveiling the Mate 60 Pro equipped with cutting-edge domestic chips. Now, a former high-level chip insider has revealed to Bloomberg, delivering a stark message: The efforts of Washington and Silicon Valley elites to limit China's rise in advancing chip technology will likely fail. 

Former vice president of Taiwan Semiconductor Manufacturing Co., Burn J. Lin, said when Semiconductor Manufacturing International Corp. and Huawei unveiled the Mate 60 Pro with 7-nanometer technology, this development shook Washington at its core because the US has been hammering the world's second-largest economy with export controls aimed at hobbling chip development. 

Huawei's Mate 60 Pro sparked celebrations in China that Washington's chip restrictions were failing. Lin expects SMIC to develop the next generation of 5-nanometer chips using advanced extreme ultraviolet lithography systems from ASML Holding NV. For some context, the new iPhone 15 is running on 3-nanometer chips. 

In response to the Mate 60 Pro, the US Commerce Department announced earlier this month that it would significantly restrict exports of artificial intelligence chips to China. The new rules will make Washington's authority even greater to decide what products US companies can and can't ship to China in the name of national security. 

However, Lin explains in an interview this week at National Tsing Hua University in Hsinchu, Taiwan, "It is just not possible for the US to completely prevent China from improving its chip technology." 

Lin added: "What the US really should do is to focus on maintaining its chip design leadership instead of trying to limit China's progress, which is futile as China is adopting a whole nation strategy to boost its chip industry, and hurting the global economy." 

Bloomberg noted Lin's comments were similar to Arm Holdings Plc boss Rene Haas earlier this month.

The Huawei breakthrough has US national security hawks losing their mind over the inability to inhibit China's chip accession. Washington might have a meltdown over a new report from Canadian research firm TechInsights Inc. that discovered some of the world's most advanced 3D NAND memory chips are coming from Chinese firm Yangtze Memory. 

"YMTC is quietly developing advanced technology despite being hampered by issues following sanctions," TechInsights wrote in the report. 

Perhaps these developments suggest China can overcome Washington's trade restrictions and beef up its domestic semiconductor supply chain.