Gas Pump Jive Part II: “Obscene” Windfall Profits

For decades government imposed laws and regulations have made exploration and drilling for oil here in America almost impossible.

oilco-taxes-profit.gifPoliticians, especially Democrats, but including some Republicans, have long submitted to lobbying by anti-liberty leftists who invoke “the environment” to justify forbidding domestic energy production.

The political elite rejects reasoned debate and rational policy for insipid slogans like “we can’t drill our way out of this,” and “Americans are addicted to oil.” Instead of permitting liberty to work Senators and Congressmen use the power of government to prevent people from producing more oil and natural gas while they chant vacuous catchphrases about “alternative” or “renewable” energy sources that aren’t yet technologically feasible, and may never be.

The market forces of supply and demand explain the entirely predictable result of politcally driven bans on domestic energy production: Global demand for petroleum products has risen faster than the global supply of oil. The result has been continuously increasing oil prices, and continuously increasing gasoline prices.

With the pump price surging past $4.00, formerly indifferent, uninformed citizens demand an explanation. The politicians who, when most citizens weren’t paying attention, caused the artificial scarcity and resulting price spike now seek to divert the blame away from themselves. Some are blaming the companies who produce gasoline for realizing too much profit.

OilCo profits have increased recently because they are selling a commodity that Congress has deliberately made scarce! If Congress hadn’t banned domestic oil production there would be greater supply, lower prices, and probably, less profit!

Senator Richard Durbin, Number 2 Democrat in the Senate said last week:

“The oil companies need to know that there is a limit on how much profit they can take in this economy…we’re going to find ourselves in a deep recession.”

Mr. Durbin should try to explain how recessions are caused by profits. In reality, falling profits are a contributing cause of recessions, and rising profits signal the end of recessions.

In a June 20 video, placed on Youtube by the Obama Campaign, the Senator acknowledges gas prices as “a crushing burden on working families.” But rather than put the blame where it belongs, on Congress for not allowing liberty to work, and forbidding oil produciton in the US and in US waters, Senator Obama says his plan is…

“…taxing some of the record, multi-billion dollar profits of the oil companies and using some of that money to pay for a thousand dollar middle class tax cut that would go to 95% of all families.”

Based on recent IRS data, it would cost approximately $127 Billion dollars to issue a $1,000 tax credit to 95% of families. Could an additional tax on oil profits fund it?

The Table above shows federal taxes already paid by, and the after tax profits earned by the eight largest American oil producers.

Obviously, Senator Obama is either uninformed or deliberately trying to deceive listeners he hopes won’t take the time to look into the facts. Obviously, taxing “some of the profit” and “using some of that money” would not begin to fund $127 Billion in tax credits.

On the other hand, the taxes these companies already pay would fund those tax credits with $74 Billion left over!

We haven’t heard any of the politicians who caused the recent spike in pump prices admit that government profits from gasoline sales much more than oil companies. By the way, the tax figures in this table don’t include state taxes paid by local gasoline retailers, that probably exceed $50 Billion.

Next, we’ll compare oil industry “obscene” profits, with those of other sectors.

Readers comments invited

2 Comments so far

  1. theclassiclib on June 25th, 2008

    Looks to me, that it’s Congress who’s receiving the “windfall profits”! Yet, the government is DEEP in the red. Morons.

    When will people learn? Probably never. It’s so much easier to have a Boogie Man to blame – those evil Corporations!

    The internet puts a vast amount of information in front of everyone’s eyes. Will people eventually start to learn and hold the Politicians feet to the fire? Or will they forever continue to put their faith in the sound bytes of snake oil salesmen (read Politicians)?

    Only time will tell … but my fear is that sloganeering (“change” for example) will continue to trump knowledge in the collective conscience. After all … the sloganeering gets pumped through kids brains like a constant mantra in the public schools these days.

    Wake up people! Wake up!

  2. aaa again on June 25th, 2008

    Speaking of windfall profits……

    Let’s say the average family has two cars, and in the aggregate drives 35,000 miles per year at a combined city/highway 20 miles per gallon. So they purchase 1,750 gallons per year. Now let’s suppose per gallon gas prices rose from $2.50 (the price, plus or minus, for many, many years) to $4.00, or an increase of $1.50. The annual cost to them? $2,625. Pretty significant, to be sure. And it results in cries for windfall profits taxes, pity laden claims of people forced to choose gas or food, or health care. The cost over four years? $10,500.

    But how about another expense? The cost of a college education. Have you looked at the cost escalation – two decades old now?? Any parent facing college costs would take an annual $2,625 increase in a heart beat. I dare say over the past couple decades they have increased tens of thousands.

    Any cries for ‘windfall profits” taxes against colleges? Any Congressional hearings??? Any cries of “excessive” professor pay, or administrators? Nope. Why?
    Gee, could be benign neglect. I doubt it though. I suspect its simply this: colleges, and college professors are bastions of liberalism. So that’s “different.” As always with leftist thought its do as I say, not as I do.

    The left: Dishonest as ever.