Obscene?

So the new Democratic speaker of the House, Nancy Pelosi, has a word for oil company profits — "obscene." That was the word she used in her hometown of San Francisco at a breakfast marking Martin Luther King Day. It's not a good omen for the future of the American economy when one of the top politicians says that companies are making too much money for their shareholders. That's what companies are supposed to do in capitalism — maximize profits. If the oil company executives had done anything short of it, Ms. Pelosi's trial lawyer campaign contributors would be hounding them with shareholder lawsuits.

Ms. Pelosi thinks action in Washington is required to reduce the profits of the oil companies, and one of her pieces of legislation for the first 100 legislative hours is H.R. 6, which the congresswoman justifies on her Web site by saying that "In 2006, the big five oil companies made $97 billion — nearly five times their profits in 2002. Gas prices at the pump also topped $3 per gallon." If Ms. Pelosi wants to dial the profit levels in the American economy back to 2002, which was a bad year as the economy struggled to recover from the terrorist attacks of September 11, 2001, we suspect she may not be speaker of the House for long.

The problem she faces is that the market economy has adjusted on its own to high oil prices. Consumers have adjusted by buying smaller and more fuel-efficient cars, including some with hybrid motors. The price of a barrel of sweet crude oil is down to $52 from nearly $80. Some of that is the result of warm weather, but supply and demand have a way of adjusting. If Ms. Pelosi were really worried about high gasoline prices for consumers, she'd be focusing not on oil company profits, which are about 10 cents a gallon, but on taxes, which in New York are about 68 cents a gallon.

Yet somehow there's no effort by Ms. Pelosi to cut the federal gasoline tax. On the contrary, other Democratic politicians, such as Vice President Gore, have proposed a carbon tax that would intentionally drive up the cost of gasoline even more, to encourage conservation and reduce pollution. In that case, the money from high gasoline prices would wind up in the hands of the government. What Ms. Pelosi seems to object to is that some of the gasoline revenues have wound up in the pockets of shareholders rather than the government.

Let her consult the Web site of ConocoPhillips, which cites a Businessweek study reckoning that, measured by profits for each dollar of sales, banks, pharmaceutical companies, software companies, and the real estate industry were all more profitable than energy companies in 2005. It also cites research from the American Petroleum Institute showing that gasoline prices have increased far more slowly than college tuition, food, or housing costs.

In our view, corporate profits, whether they are at Goldman Sachs or in the energy sector, aren't something to complain about, but something to cheer. They are a sign of success, and better than the alternatives, which are losses and layoffs and bankruptcies. If Ms. Pelosi does not comprehend this, some 2008 presidential candidate with extensive private-sector business experience — Mayor Bloomberg or Governor Romney come to mind — will gain an advantage by explaining it. None of this is an argument against making sure that when oil companies drill on public land, they pay what they owe, a fair price. Oil companies don't deserve subsidies. But neither do their profits deserve to be singled out as "obscene" while the Democrats hatch plans to give new subsidies to agricultural giants pushing ethanol.