Over the past two years, I have discussed at length the benefits of the coming U.S. trade in liquefied natural gas (LNG).
Exporting LNG will offset the glut forming from excessive shale gas extractions, bringing balance to the U.S. market. It will also cause a small group of companies already involved in the development of this trade to become a main focus of investors.
This is a complete game-changer.
Remember, the LNG process cools the gas to a liquid, allowing it to be moved over long distances by tanker instead of just via pipeline. It is then regasified on the receiving end and injected into existing transit pipeline systems for delivery to consumers.
Already, the construction of LNG receiving terminals in Asia and Europe is accelerating. These are the two markets most in need of large increases in imports. The continents need to both meet rising demand and restrain the prices commanded by long-term pipeline-delivered gas.
Luckily, LNG can do both.
Last week, six Members of Congress, led by Rep. Dennis Kucinich (D-Ohio), introduced the "Gas Price Spike Act."
With concerns over the likelihood of higher gas prices this summer, the bill and its sponsors propose the creation of a "Reasonable Profits Board" that would control the profits of oil and gas companies.
Under the bill, this board – made up of unelected bureaucrats – could apply a "windfall profit tax" on the sale of oil and gas at rates of 50% to 100%. These taxes would take aim at corporate profits that the board feels are "unreasonable" or "unfair."
Congress would then appropriate the money raised to subsidize electric vehicles and mass transit.
Now you may want to take a second and breathe, because this is no satire.
Oh, and the proposed bill offers no specific guidance on how the board would determine what represents a "reasonable profit." How do we even begin to define this term? Are some profits more unreasonable than others? And who decides what is "reasonable?"
Yesterday, Apple Inc. (Nasdaq: AAPL) shattered earnings expectations. The electronics company has a profit margin north of 20%; meanwhile, the oil and gas industry has a sector-wide margin a little less than 10%.
And though the price of oil and gas will rise in the future – and despite the name of the bill – a reasonable profits board would do nothing to improve consumers' plights at the pump.
In fact, it would only make things worse for people like you and me.
