Windfall Profits Tax Has NEVER Worked

[aplusmnt]

[nonothing]

[Sandhusker]

The oil companies fortunes are the result of the arena partially created by those politicians who blame them. A big part of this is supply and demand and the liberals have a long list of places we can't drill and they've made it prohibitively difficult to put in new refineries. We've got more people and the same number of gas producers, what they heck do they think is supposed to happen?

On the other hand, the Reps. have allowed industry consolidation to happen at a rate to where there are so many fewer oil companies and thus, less competition. They also have been reluctant to do anything with the big funds that distort oil prices via the futures markets.

The Sandhusker solution;
1) Get the board of the CBOT to enact new rules so that big funds can't just come in and buy and roll their long positions. Yes, SH and you other morons that claim you can't dictate who can and can't own contracts, you can and we have to.
2) Get more refineries built. Even if the goverment has to build them and then sell/lease them, get them built - and not in the same places as the others so that a regional storm will cause supply problems for the whole country.
3) Go balls out on renewable energy programs. JFK put up the challenge that we would have a man on the moon in 10 years once and people wondered about his sanity. Then he got the wheels turning and did it in less than 10. We need to do the same with solar/wind/super conductors/ etc..... It's time to get serious and quit treating green energy like a hobby and more like a business.

This message paid for by the Sandhusker for President Committee.

[aplusmnt]

[aplusmnt]

Based on the 2005 dollar $3.11 per gallon would be the price we should be paying to keep up with inflation based on gas prices in 1981. I am sure 2005-2008 inflation would push that price per gallon closer to $3.50 per gallon, but that is my guess.

Scroll down to graph close to bottom of page
http://www.gravmag.com/oil.html

[Texan]

REVIEW & OUTLOOK

Windfall Profits for Dummies

May 3, 2008; Page A10
WSJ Online


This is one strange debate the candidates are having on energy policy. With gas prices close to $4 a gallon, Hillary Clinton and John McCain say they'll bring relief with a moratorium on the 18.4-cent federal gas tax. Barack Obama opposes that but prefers a 1970s-style windfall profits tax (as does Mrs. Clinton).

Mr. Obama is right to oppose the gas-tax gimmick, but his idea is even worse. Neither proposal addresses the problem of energy supply, especially the lack of domestic oil and gas thanks to decades of Congressional restrictions on U.S. production. Mr. Obama supports most of those "no drilling" rules, but that hasn't stopped him from denouncing high gas prices on the campaign trail. He is running TV ads in North Carolina that show him walking through a gas station and declaring that he'll slap a tax on the $40 billion in "excess profits" of Exxon Mobil.

The idea is catching on. Last week Pennsylvania Congressman Paul Kanjorski introduced a windfall profits tax as part of what he called the "Consumer Reasonable Energy Price Protection Act of 2008." So now we have Congress threatening to help itself to business profits even though Washington already takes 35% right off the top with the corporate income tax.

You may also be wondering how a higher tax on energy will lower gas prices. Normally, when you tax something, you get less of it, but Mr. Obama seems to think he can repeal the laws of economics. We tried this windfall profits scheme in 1980. It backfired. The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased oil imports from OPEC by 8% to 16%. Mr. Obama nonetheless pledges to lessen our dependence on foreign oil, which he says "costs America $800 million a day." Someone should tell him that oil imports would soar if his tax plan becomes law. The biggest beneficiaries would be OPEC oil ministers.

There's another policy contradiction here. Exxon is now under attack for buying back $2 billion of its own stock rather than adding to the more than $21 billion it is likely to invest in energy research and exploration this year. But hold on. If oil companies believe their earnings from exploring for new oil will be expropriated by government – and an excise tax on profits is pure expropriation – they will surely invest less, not more. A profits tax is a sure formula to keep the future price of gas higher.

Exxon's profits are soaring with the recent oil price spike, but the energy industry's earnings aren't as outsized as the politicians seem to think. Thomson Financial calculates that profits from the oil and natural gas industry over the past year were 8.3% of investment, while the all-industry average is 7.8%. And this was a boom year for oil. An analysis by the Cato Institute's Jerry Taylor finds that between 1970 and 2003 (which includes peak and valley years for earnings) the oil and gas business was "less profitable than the rest of the U.S. economy." These are hardly robber barons.

This tiff over gas and oil taxes only highlights the intellectual policy confusion – or perhaps we should say cynicism – of our politicians. They want lower prices but don't want more production to increase supply. They want oil "independence" but they've declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?

Late this week, a group of Senate Republicans led by Pete Domenici of New Mexico introduced the "American Energy Production Act of 2008" to expand oil production off the U.S. coasts and in Alaska. It has the potential to increase domestic production enough to keep America running for five years with no foreign imports. With the world price of oil at $116 a barrel, if not now, when? No word yet if Senators Clinton and Obama will take time off from denouncing oil profits to vote for that.


http://online.wsj.com/article/SB120977019142563957.html?mod=opinion_main_review_and_outlooks

[TSR]

[Mike]

[aplusmnt]

[aplusmnt]

Some figures from a few years ago, when people were still complaining about record profits of oil companies.

For instance, in 2004 Exxon Mobil earned more money -- $25.33 billion -- than any other company on the Fortune 500 list of largest corporations. But by another measure of profitability, gross profit margin, it ranked No. 127

Most financial institutions, such as commercial banks, are routinely more profitable than Exxon Mobil was in its third quarter. For example, Exxon Mobil's gross margin of 9.8 cents of profit for every dollar of revenue pales in comparison to Citigroup Inc.'s 15.7 cents in 2004. By percentage of total revenue, banking is consistently the most profitable industry in America, followed closely by the drug industry.

Altria Group, the maker of Marlboro and other cigarettes, made 22 cents for every dollar of revenue in 2004, and pharmaceutical company Merck made 25.3 cents for every dollar of revenue in 2004.

By other measures, such as profit per employee, return on invested capital and free cash flow, Exxon Mobil is nowhere near a standout

And the cost of extracting and refining oil in the coming years is only going to increase, requiring hundreds of billions of dollars of investment.



http://www.washingtonpost.com/wp-dyn/content/article/2005/10/27/AR2005102702399.html

[TSR]

[Oldtimer]