People commenting publicly about the BP spill need to choose their words carefully, as certain comments play badly on short-attention span TV. Parker Griffith (R-Alabama) recently refuted the oft-stated comment that the BP spill is one of the most impactful environmental disasters ever.
From Oncologist to Apologist
Griffith made a point to tell the congressional committee:
"...I'd like to remind the committee [that] the greatest environmental disaster in America has been cigarettes...let's be sure we don't leave that out...[T]he environment is an important concept. We regret the loss of life. But there's much that we can do, and we'll put this in perspective. This is not going to be the worst thing that's ever happened to America."
Master of relativist thinking, Griffith lets BP off because of tobacco and some ominous future disaster? And his idea of 'environment as concept' -- I like that. Maybe he was seeking to qualitatively bolster his disapproval of the moratorium on off-shore drilling that he called "a public relations stunt" earlier in the week.
We're used to oil spill gaffes, we chortle and put our hands to mouths in gestures of mock horror when hearing: "We care about the small people" (BP chairman Carl-Henric Svanberg), or "I'd like my life back"(from banished BP CEO Tony Hayward). But Griffith's comment wasn't a gaffe. He was serious.
From Republican To Democrat
Griffith is a lame duck representative who lost his primary after changing parties. He has campaigned to ban cigarettes in Alabama. He's a retired radiation oncologist, who says "I never fail to bring that up." He changed parties because he disapproved of the health care bill (interesting, since the bill purports to help lower income people, who are more likely to smoke).
So maybe after he exits Congress he can continue with his anti-smoking campaign, such as it is, since he's seems less effective, in terms of public interest, campaigning for sustainable energy and the environment.
Maybe there's a place for him (at BP), or getting more people to quit smoking. Now for the segue. Despite various government actions and the lack of recent press about cigarettes, tobacco remains profitable. Efforts continue to curb smoking through taxes and smoking bans, but cigarette consumption has leveled out after falling for decades, writes the Financial Times. Accordingly, future taxes will not impact tobacco profit, and tobacco is a good investment.
Investors' Perennial "Love"
Investors will "come to love the sector", says FT, explaining how the price elasticity of demand for cigarettes has remained stable with price and volume for decades:
"...Last year's 25 per cent price increase per pack caused consumption to fall 8 per cent, an elasticity of -0.34, calculates UBS. By comparison, since 1969 prices have risen 87 per cent (adjusted for inflation), while consumption fell a third, giving a similar elasticity of -0.37. Based on this fairly steady relationship, UBS argues that tobacco manufacturers can sustain price increases of 4 to 5 per cent annually (8 to 9 per cent for retail prices) for the next decade, while absorbing consumption declines of 3 to 4 per cent..."
Very interesting, if discouraging because all told, FT concludes: "Not one for socially responsible investors but, for the rest, it may be time to light up".
From Politician to Lobbyist?
Which means that the recently proposed NY State cigarette tax increase may help state coffers, but it won't put cigarette makers out of business. At $5.85 $9 or $11 (in NYC) a pack, the American Cancer Society cheered the tax, because higher prices reduce the number of smokers. Of course the Seneca Nation doesn't like it, noting that they will fight for their ancestors treaties.
Lobbyists for cigarette retailers, also opposed, warn that black markets for tobacco will become more lucrative. Which is why multi-pronged regulation is best. The US Postal ban on mailing cigarettes goes into effect at the end of this month. But, cheers UBS, there will be enough smokers to keep the profit flowing.
Liberated from law-making, Griffith could put his crafty rhetoric skills to use for his favorite cause. And apparently he won't hurt the sector. And he could probably safely lobby for alternative energy too. What's the price elasticity of oil? Or will it just run out?
