Take That, Big Oil!

[Big Don]

Take that, Big Oil!
By Jonah Goldberg
Townhall.com
Excerpt:
Friday, May 9, 2008
Imagine this. You've built the better mousetrap. (Because lasers and pneumatic tubes are cool, let's imagine it uses them.) You've persevered through years of trial and error in your garage, enduring sleepless nights, the mockery of friends, the eye-rolling of family and the non-lethal laser wounds to the family cat. But it was all worth it. You take your invention and, with your last few pennies, manage to bring it to market. It's a smash hit. It starts flying off shelves. You earn back the investment in raw materials and maybe something close to compensation for your time. Now you're ready for the big payoff. There's just one thing left to do: make an appointment with the regional Reasonable Profits Board to find out how much of your windfall is reasonable for you to keep.
Picked by Congress nominally for their expertise in analyzing the mousetrap industry but actually for their vampiric lust for entrepreneurial blood, members of the Reasonable Profits Board will determine how much of your already-taxed profits cross the "rational threshold."
Now that's the American dream!
What this would mean for Mousetrap 2.0 may not be a big concern for members of the board, but odds are you'll start to feel like you're working for them.
Replace "Mousetrap" with "oil," and you have a good idea of how some in Congress want to bring the oil industry to heel. Rep. Paul Kanjorski, D-Pa, is offering his "Consumer Reasonable Energy Price Protection Act," which would make oil companies supplicants of a Reasonable Profits Board. Senate Democrats, led by Chuck Schumer and Harry Reid, proposed their 25 percent windfall profits tax this week, while Rep. Dennis Kucinich, D-Alpha Centauri, has been calling for a 100 percent windfall profits tax rate for some time.
End Excerpt

 

[theletch1]

Heard something or other about the "Reasonable profits board" on the radio this week. That should scare the hell out of any American who owns a business of their own. "Your dojo earned more last quarter than we believe is reasonable. We're taking it." Not too farfetched if you ask me. Big Oil just happens to be the bad guy du juor. With all the other behind the scenes crap that goes on with our government it wouldn't surprise me at all to find that all businesses in this country start getting hit with "excessive profits penalties".

Hey, Bob, did you make a profit on MT this year?:idunno:

 

[crushing]

Hey, Bob, did you make a profit on MT this year?:idunno:

First they came. . .

Hmmmm. I wonder why is Congress so afraid to do the 'reasonable profit' thing across the board, to all industries, including those industries with much higher profit margins than big oil?

 

[rutherford]

We had a windfall profit taxes against the oil companies through most of Reagan's administration. This is not a new idea.

Personally, I think an end to corporate welfare for all but startup businesses, removal of corporate health care costs, and progressive taxation would lead to a much more fair and healthy system.

 

[RandomPhantom700]

Sorry, not feeling any sympathy for oil companies like Exxon. The mousetrap analogy is also a bit innacurate; with the mousetrap inventor, their soaring profits aren't causing an entire national crisis at the gas pump, helping to drive inflation. Is the cost of mousetraps affecting almost every other industry in America? No.

Should the regulations be limited so that other corporations and small businesses don't get caught in the net? Absofrigginlutely. Should Big Oil continue to swim in cash while the rest of us are forced to choose between filling the gas tank and having lunch for the next two weeks? Absofrigginlutely not.

 

[crushing]

I don't see where anyone was attempting to generate sympathy for a particular industry. The point that was lost was targetting of a specific industry (a mousetrap industry or oil industry). But what wasn't translated to the mousetrap industry was the creation of a bogeyman to distract the public from seeing government's failure for decades to create a decent forward looking energy policy

Why do politicians create bogeymen? Because it makes it easier to divide, conquer, and make it look like they accomplished something. If Congress were to come out with a 'reasonable profit' Act that applies across the board then the majority of people would realize, "Hey that means my business too!" But, with the targetting of a specific industry, the majority of people can say, "Pheeww! I'm glad they aren't coming after me like that." Which was the reason for my "First they came. . ." snippet.

Don't get me wrong, I'm not defending the oil companies, I'm attacking cowardly politicians that engage in such activities rather than engage in a real and meaningful dialog that may lead to real solutions and a real energy policy.

We won't see an across the board 'reasonable profit' act because it would impact lawyers, big pharma, and others that have higher profit margins (and more politicians in pockets) than big oil.

 

[Big Don]

What if the oil companies collectively decided they had had enough of being slandered and bad mouthed and quit selling their fuels here? Would you all encourage the government to intervene? On what legal grounds? Would you steal their fuels? The corporations could easily sell their wares elsewhere, why sell in a place where so many are so openly hostile to them?

 

[Empty Hands]

The analogy would be more apt if the government wasn't shoveling taxpayer money at the oil companies. They have record profits, and they still get huge amounts of corporate welfare. I don't think they are in any danger of bankruptcy, so the welfare should go - and then the arguments against a windfall tax would hold a lot more weight.

 

[Ninjamom]

.....Should the regulations be limited so that other corporations and small businesses don't get caught in the net?

What seems to be lost in the discussion is that other corporations and small businesses ARE caught in the net.

Here's the way it works: Taxes on oil profits go up ---> Prices for oil go up.

You didn't think The Oil Companies (all capitalized, of course) will sit back and NOT pass the increased costs of doing business (which is all a 'tax' is) on to us consumers, did you? So the net effect of increasing tax on oil profits will be an increase in the cost of oil, which in turn (as someone rightly pointed out) will increase the cost of EVERYTHING else in the economy.

If The Government (also capitalized) really wants to help small businesses, may I humbly ask that they just please leave us the heck alone??!?!?!

 

[Sukerkin]

There are indeed plenty of economic laws to prevent just that sort of collusive and coercive action, Don.

Big Oil (or gas, or haberdashery) is in no way expected to run a business at a loss. Profiteering, however, is another thing entirely (and used to be an imprisionable offence at one time).

 

[RandomPhantom700]

What seems to be lost in the discussion is that other corporations and small businesses ARE caught in the net.

Here's the way it works: Taxes on oil profits go up ---> Prices for oil go up.

You didn't think The Oil Companies (all capitalized, of course) will sit back and NOT pass the increased costs of doing business (which is all a 'tax' is) on to us consumers, did you? So the net effect of increasing tax on oil profits will be an increase in the cost of oil, which in turn (as someone rightly pointed out) will increase the cost of EVERYTHING else in the economy.

If The Government (also capitalized) really wants to help small businesses, may I humbly ask that they just please leave us the heck alone??!?!?!

The oil companies have, largely, been left alone, which is why with the opening of larger foreign markets and a monopoly on the energy market, they have the liberty to extort the average consumer with impunity. Their soaring profits, especially upon the backdrop of a recession economy where almost every other industry is having to cut back and put out layoffs, shows that they're hardly strapped for cash. To put it frank, Big Oil has the American people by the balls, and is squeezing for all its worth. And if you ask me, this is largely because the government has been uninvolved for so long. Why is it, for example, that energy plans and alternative fuel sources have only seriously become national agendas in the last few elections?

Again, in the majority of competitive business situations, I'd say that the government should leave the market to do as it will, but this is simply not the case with the current fuel crisis, particularly where that crisis is having such negative impacts on almost every other facet of the American economy.

 

[RandomPhantom700]

What if the oil companies collectively decided they had had enough of being slandered and bad mouthed and quit selling their fuels here? Would you all encourage the government to intervene? On what legal grounds? Would you steal their fuels? The corporations could easily sell their wares elsewhere, why sell in a place where so many are so openly hostile to them?

So what's the conclusion, Don, all American consumers and their legislative representatives should therefore bow down before Big Oil and thank them for gracing us with their business? For certain groups of citizens, specifically the rich, the rising gas prices are little more than an annoyance, but for the rest of America, $4 a gallon of regular is extortion.

 

[Bob Hubbard]

Heard something or other about the "Reasonable profits board" on the radio this week. That should scare the hell out of any American who owns a business of their own. "Your dojo earned more last quarter than we believe is reasonable. We're taking it." Not too farfetched if you ask me. Big Oil just happens to be the bad guy du juor. With all the other behind the scenes crap that goes on with our government it wouldn't surprise me at all to find that all businesses in this country start getting hit with "excessive profits penalties".

Hey, Bob, did you make a profit on MT this year?:idunno:

The oil companies say their rofits are in line with everyone else, percentage wise. Thing is, 7 percent for them is 25 Billion Dollars. For me, it's about enough to buy a Wii. Big difference.

And, as to do I make a profit from MT, that depends on how you look at things. Last year only, yes, overall, no. So far this year no.

 

[Bob Hubbard]

The oil companies say their rofits are in line with everyone else, percentage wise. Thing is, 7 percent for them is 25 Billion Dollars. For me, it's about enough to buy a Wii. Big difference.

And, as to do I make a profit from MT, that depends on how you look at things. Last year only, yes, overall, no. So far this year no.

Personally, I'm not big on this "reasonable profits" thing. I'd rather see them regulate the price of a gallon of gas, with reasonable allowances for increase AND decrease. Something like "sale price of a gallon of gas must be 5-10% the cost of a gallon of oil. Taxes added on top of that price."

So 1 barrel of oil = $125
50 gallons / barrel
cost of 1 gallon oil = $2.50
10% profit allowed = $.25
Gallon of gas = $2.75 + taxes
NYS gas in WNY taxed about 75 cents per gallon
1 gallon gas in WNY = $3.50


So 1 barrel of oil = $80
50 gallons / barrel
cost of 1 gallon oil = $1.60
10% profit allowed = $.16
Gallon of gas = $1.76 + taxes
NYS gas in WNY taxed about 75 cents per gallon
1 gallon gas in WNY = $2.51

 

[Brian Johns]

While the profits made by Big Oil companies may appear grotequesly obscene, I think that the focus on them as the bad guys is off base. Let's talk about who really calls the shots in terms of oil production.

The fact of the matter is that the blame for the current situation should be laid at the feet of the major oil producing countries. Who calls the shots for the oil producing countries ? It's not the Big Oil Companies like Exxon and the like. It's OPEC (The Middle East) and other countries whose interests do not align with that of the USA (Russia and Venezuela to name a couple) or are on the verge of failed state status (Nigeria, which is deeply troubled). In the case of Venezuela, Hugo Chavez has nationalized oil for the purpose of his absurd "Bolivarian Revolution." In Russia, do you think that Vladimir Putin would allow big oil to reap profits....no siiiiiirr....all that money is goingto rebuild the Russian state, security apparatus and its military.

Then you have the Chinese government going all over the world striking deals in various places in order to secure a steady supply of oil to their growing middle class. India is gonna explode. Don't forget about places like Brazil and Indonesial which have burgeoning middle classes, which in turn want to buy cars. Demand for oil in Russia is growing as well.

Add all that up.....the classic law of increased demand and limited supply and you have the situation that we have today. There's probably a fair bit of speculation as folks are investing in oil due to the weak dollar, which is driving up the price of oil.

I'm not done yet......then you have the auto companies. I cannot believe that they could not forecast, say 10 years ago, that the Chinese and Indian middle class would put upward pressure on the price of oil and thereby making it expensive to fuel up the gas guzzling SUVs. Instead, they have been caught with their pants down due to poor planning.

Yes, Big Oil deserves to be scrutinized closely. Are they to be entirely blamed for the current price of oil ? Hardly.


Take care,
Brian

 

[Sukerkin]

Observant points, Mr. Johns :tup:.

 

[Empty Hands]

The fact of the matter is that the blame for the current situation should be laid at the feet of the major oil producing countries.

No, this isn't true. All of the major oil producing countries (except the ones that aren't capable) are producing at or near capacity, and doing their best on the exploration front. Why wouldn't they? Oil is at a record high and every barrel shipped out is extra money in their pockets.

OPEC or Saudi Arabia or Venezuela or whomever couldn't drop the price of oil if they wanted to.

 

[Bob Hubbard]

Table 11.5 World Crude Oil Production, 1960-2006
http://www.eia.doe.gov/aer/txt/ptb1105.html

Interesting numbers on Oil production and where it's from.

 

[Big Don]

No, this isn't true. All of the major oil producing countries (except the ones that aren't capable) are producing at or near capacity, and doing their best on the exploration front.

The US isn't. Nor, is Mexico. None are producing to capacity. OPEC controls a vast amount of oil and ONLY allows so much to be produced. This, allows them some control over oil prices. READ THIS

Why wouldn't they?

The environmentalist lobbies have caused restrictions or outright bans on exploration, drilling and refinement. There hasn't been a new oil refinery in the US in over twenty years.

Oil is at a record high and every barrel shipped out is extra money in their pockets.

Likewise, every dollar spent paying an American to explore for, drill for, pump or refine oil would represent BILLIONS in tax revenues for the US, not to mention the sales taxes that would benefit the states and localities.

OPEC or Saudi Arabia or Venezuela or whomever couldn't drop the price of oil if they wanted to.

Bull. They could, and have, when it suited them, lower what they sell it for. GM could sell you a Chevy for a dollar if they wanted to... Corporations don't pay taxes. Every dime of corporate taxes paid came not from the corporation's bank account, but, rather from their customers' accounts. If a windfall profits tax goes thru, gas prices will only get higher.

 

[Bob Hubbard]

orporations don't pay taxes. Every dime of corporate taxes paid came not from the corporation's bank account, but, rather from their customers' accounts.

That's true. Just as people don't pay taxes, as every dollar paid into taxes came from the persons employers bank account.