Take the policy out of it – gas just went over $4/gallon, unemployment is up, the mood of the country is sour – does John McCain really think that there’s points to be made advocating for a corporate tax cut? Rewarding the oil industry for reaming the American consumer? Sounds like folly to me.
So is your solution a windfall profits tax?
Last time we did that we ended up with even less production and therefore the supply tightened. Foreign suppliers got better deals of course because they have no such tax.
Respectfully,
The Squid
I dunno how I feel about windfall profits, but I don’t think we should be giving the oil industry a free pass.
“I dunno how I feel about windfall profits, but I don’t think we should be giving the oil industry a free pass.”
I dont see how further regulating them will make our problems go away, they will just start selling to China. We sure as heck are not letting them drill here.
Respectfully,
The Squid
Is that your solution to everything? Drill everywhere? How many wells do you have going in your backyard?
Oil companies aren’t the only businesses that would enjoy corporate tax cuts, you know. How about the middle class? Remember them?
In OliverWorld, Jessica Alba is married to a Media Matters staffer, Candy Canes and gumdrops grow on trees, and Corporations don’t pass taxes on to the consumer.
Oliver wrote:
A complex problem reduced to a bumber sticker. Of course Oliver offers no solution except taxation or, as some Democrats have offered, to nationalize the oil industry. Great solutions both, no?
Or not.
My understanding of the oil situation is that the companies are not earning much per-unit, that their ‘record profits’ are almost entirely volume-driven; i.e. they’re rolling in money because Americans really feel they need to drive everywhere they go and we’re not going to ride the bus with the poor folks and the wackos.
According to CNN.com, oil companies profit margins on the S&P Energy Sector are 9.7%, while the S&P average is 8.5% – or oil companies, as measured by profit margin, are 1.2% more profitable than the average. Google’s profit margin, on the other hand, is 25%.
It seems to me that this comes down to which figure one finds more important, the per-unit profit or the total profit (if the oil companies make ten cents a couple of trillion times, that’s a hell of a lot of money). Unless there’s something I’m missing, profits made by virtue of volume don’t suggest that the oil companies are intentionally reaming the American consumer.
I think that refinery capbility may play a factor as well.
“I think that refinery capbility may play a factor as well.”
I believe you’re right. Forgot to mention it.
Please excuse my poor grammar in that last post. I am better than that.
Respectfully,
The Squid
Exactly how is the oil industry ‘reaming’ the American consumer? Exxon-Mobil has zero control over the cost of a barrel of oil. However, that cost does affect everything right down the line.
We have no refinery capacity and haven’t built a new one since 1976 in this country. South Dakota finally cleared a major hurdle in being able to do so, but said they won’t be ready to break ground for another two years. The NIMBY’s are up in arms and are expected to continue to fight it.
Duros, as for the drilling, it was around 10 years ago that Democrats (for the most part) pooh-poohed the idea of drilling in ANWR because it would “take nearly 10 years” for any of the oil to be used. Think that might have been important?
And speaking of profits, the United States government (state and federal) between 1977 and 2004 (adjusting for inflation) has raked in $1.34 TRILLION in revenue from gasoline. That’s about twice what the oil companies saw in profits over the same period.
Hey Jay, if we have no refining capacity why are refiners running what they have at only 85%?
Couldn’t be to jack the price up, would it? (nah, they wouldn’t do that)
Link for the terminally brain-dead:
http://online.wsj.com/article/SB121090017595697445.html?mod=googlenews_wsj
Hard to imagine that a company that made a profit selling a product at $30 doesn’t make a hell of a lot more profit selling it for $130.
Hey Jay, if we have no refining capacity why are refiners running what they have at only 85%?
There’s this little economic theory that’s called supply and demand. You may have heard of it. Demand for gasoline has waned in the last few months, therefore output does not need to be has high. 75% of the price of a gallon of gas is tied to the price of oil, and another 12% is in state and federal gas taxes. That leaves around 13% for refining and distribution.
As for “jacking up the price”, there are refineries that have to purchase oil on the open market to refine into gasoline, so some of them are producing more diesel which is in higher demand than regular gasoline. Because despite lower demand, prices are still increasing. That affects – tada! – refining profit margins. So with falling demand coupled with rising costs, refineries have cut back production. This may surprise you durablend, but companies actually need to make profits at some point to continue to operate.
Terminally brain dead indeed.
“..it was around 10 years ago that Democrats (for the most part) pooh-poohed the idea of drilling in ANWR because it would “take nearly 10 years” for any of the oil to be used. Think that might have been important”
No, its because ANWR would account for about 3.3 percent of the U.S. demand meaning no imapct on the price of gasoline.
Don’t forget that 10 years ago it wasn’t economically feasible to drill for that oil anyway.
“Hey Jay, if we have no refining capacity why are refiners running what they have at only 85%?”
Jay: “There’s this little economic theory that’s called supply and demand. You may have heard of it. Demand for gasoline has waned in the last few months, therefore output does not need to be has high.”
You have no idea what you are talking about, do you?
Supply and demand says that if refining capacity is running at less than 100%, adding more oil or increasing maximum refining capacity won’t change the price at the pump. The only way to do that is to reduce demand. ANWR won’t do that. Enforcing higher fuel efficiency standards will, but the GOP will block that legislation every time. Of course when they do, you will blame the Democrats for not doing anything.
The price of oil is just cost factor in a very complex formula which results in the price of gas at the pump. This formula was set with the oil cos making a fair profit with oil at $25/bl. With oil more than 5 times that now, the forula is out of whack, resulting in ‘windfall’ profits. And that refinery excuse is bullshit. Big oil closed a whole lot of refineries in the mid to late 90s, meaning less product, higher prices.
“Big oil closed a whole lot of refineries in the mid to late 90s, meaning less product, higher prices.”
Probably because they were old, we have not built a new one in 20 years, correct?
Respectfully,
The Squid
“Probably because they were old, we have not built a new one in 20 years, correct?”
They are not using the ones they have now. New refineries would have no effect on the price at the pump because refining capacity is not what is keeping supply low.
Why can’t you understand that? Why do you refuse to understand that?
“Why can’t you understand that? Why do you refuse to understand that?”
Than please tell what is if it is not being unable to drill in the US and if it is not the refineries.
Respectfully,
The Squid
Rising demand. Demand Demand Demand. Growing demand in Asia. Increased demand (5X normal) by the US military because of Iraq.
Uncertain supply is next, bad Middle East policy. Supply worries in Africa. Not enough production.
And your plan is to postpone the problem. We need to get a hold of demand by lowering it. Alternative sustainable energy, mass transit, conservation. The US will never be able to increase oil capacity beyond demand without these fundamental changes.