Thread: Profits of Doom?

Used to be a time in this country when making a profit was a GOOD thing and people getting rich was a goal. Unfortunately, the socialist mentality that has failed so many other countries seem to be slowly and incidiously creeping it's way into your psychology. Let's hope we can turn this back with the TRUTH, the FACTS and the REALITY.

It is ironic, perhaps even idiotic for politicians, both left and right, to posture on this issue when the Oil companies typically earn .08 to .10 cents on every gallon and the Government steals about .18 cents doing NOTHING to assist in the production of this product. Yet, they want us to believe that the Oil Execs are the gougers while having their hands in the pockets of the very people they wish to condemn. We call this "hypocrisy."

Profits of Doom?
Americans should be happy that oil companies are making money.

BY BRENDAN MINITER
Tuesday, May 9, 2006 12:01 a.m. EDT : WSJ

With the average price of gasoline nearing $3 a gallon and Exxon Mobil reporting $8.3 billion in profit for the first quarter of this year, lawmakers in Washington have a new purpose in life: convincing the rest of us that the "windfall profits" of the five major oil companies in the U.S. are a problem.

Sen. Dick Durbin, an Illinois Democrat, is a leader in this new line of attack, and wouldn't you know it, the windfall profits are also President Bush's fault. On "Meet the Press" recently, the senator complained that the high prices at the pump will cost the average household $1,000 this year. He blamed the Bush administration for being too cozy with the oil industry and for failing to model the country after Brazil, which is now powering most of its cars on ethanol made from homegrown cane sugar.

The solution, he says, is to punish profiteering. "All the market forces not withstanding, if the oil companies still insist on these outrageous profits, the consumers will lose and the American economy will lose."

The senator is not alone in calling the steep price of gasoline a market failure. Democrats are lining up to blame the president for not creating a more stable energy market over the past five years. House Minority Leader Nancy Pelosi says the steep prices, giveaways to the oil companies and the pinch being felt by consumer are "the Bush economic vision for our country." GOP members also blame big business. Rep. Jack Kingston, a George Republican, chimed in a few weeks ago telling a reporter: "There isn't much sympathy for oil companies on Capitol Hill right now."

Let us take a minute, then, to stick up for the big guys and ask, what's wrong with large profits for large oil companies? If a healthy profit margin--about 10% for the oil giants--is a problem, it comes with a built-in solution. Large profits create large incentives to increase supplies, build more refining capacity, and create new technology to meet energy needs. Exxon Mobil's profits alone in the first quarter of this year are four times as large as the $2 billion exploration tax credits stuffed into last year's energy bill. It's not a coincidence that more than 70% of the money spent researching new fuels comes from oil companies, not to mention the cost of drilling new wells, exploring new fields and developing technology and techniques to extract crude from fields previously considered exhausted.

Fat profits also allow American companies to keep and even expand their workforce inside the U.S. The problem isn't oil company profit, but rather the price of a gallon of gasoline and the negative effect that has on family budgets and the political crisis that creates. But that too will create political pressure that could be used to finally make the hard choices for a more rational energy policy: One that involves more drilling (Artic National Wildlife Reserve, here we come) as well as more efficient uses of energy.

Although we still have a "carbon-based economy," it's not nearly as dependent on fossil fuels as it once was. Writing computer software takes electricity, which is generated by burning coal (or something else). But it's a lot less fossil-fuel-intensive than a steel mill. An information economy is simply better prepared to handle a tight energy market than an industrial one.

To listen to Sen. Chuck Schumer and other Democrats, though, the problem here isn't so much energy policy as it is the structure of the economy. He argues that a few decades ago there were a dozen large oil companies, but today, Exxon has merged with Mobil and Chevron with Texaco, so there is in effect an oligopoly--a few large corporations that together act as a monopoly. With less than a half dozen oil giants, he says, none are willing to compete on prices. "I believe we ought to look at restructuring. We ought to examine whether we should do a little good old-fashioned trust-busting."

Sen. Maria Cantwell makes a more nuanced argument. She wants to investigate oil companies and hints at where she and her colleagues are likely already planning to find evidence to prove that something nefarious is going on: oil companies selling gas cheaper overseas than inside the U.S. "Well, we want to make sure that there is a strong law on the books that looks at the wholesale price of gasoline, because we have a question about whether gasoline is being exported out of the country for a cheaper price just to drive up the cost here in the United States," she said on CBS's "Face the Nation."

That's a politically attractive and convenient argument. But understanding that there will be different prices in different markets for the same product is also Economics 101. And, as it happens, it's a good thing, as it creates an incentive to move oil to where it is needed at a price that will ensure that gasoline is widely available. In open markets, prices convey information. And the message high prices send to oil companies is to increase the supply of gasoline inside the United States. As the supply goes up look for prices to come down. Windfall profits never last. But the infrastructure created to handle the high demand does, and we're all better off for it.

High gas prices aren't easy on consumers. Most households could find a much better way to spend $1,000 than on filling up the tank. But if there's a better way to restructure the energy market, expand supplies, and create a long-term source of stable and affording fuel, we haven't found it yet. We've tried ethanol subsidies, "windfall profit" taxes and other market manipulation tricks. None of them have primed the gas pump for lower prices. Now it's past time to drill. With a barrel of crude selling for more than $70, Congress could let the market work. There's now plenty of incentive to give ANWR's caribou a few derricks to look at.

Mr. Miniter is assistant editor of OpinionJournal.com. His column appears Tuesdays.

Illegal. Death penalty! ~Inky

Interesting. If it were someone who was polite in here and followed the rules, I would respond. However, since that is not the case, I won't, and spare him the need to insult and defame.
On to the next topic!
Purrs,
Pookie

actually, what i find interesting is that the president is the chief exective officer. he executes orders. not makes them. who makes them you might ask? the congress assembled. so, instead of blaming the person who is supposed to enforce policies, blame the group that is supposed to make those policies.