Tuesday, April 1, 2008

Big Bad Oil

Congress to investigate Big Oil profits.

Democrats want to cut tax subsidies but oil man Bush says the industry shouldn't be singled out for punishment.

Next up: The $11.7 billion bottled water industry.

UPDATE: In the meantime, Obama says he's going to hit big oil with a windfall profits tax penalty. In his most recent ads he refers to the gas shortages of the 1970s and says how nothing's changed. Except the price of gasoline is much higher. He better watch it. What caused the gas shortages were, in part, President Nixon's amazingly stupid price controls. Once they were lifted the price of oil stablized and then fell. That's the way markets work.

Dems seem to think voters are entitled to cheap gas and at the same time push environmental policies (No drilling, no nukes) that make that near impossible. What is driving the price of oil is economic expansion in the second world. China and the rest of Asia are slurping it up. Demand is higher than ever. Increase taxes and watch "Big Oil" move overseas.

6 Comments:

Anonymous randal said...

When are people going to get it that the shortsighted Socialist "solutions" of the LibDems are really no solution at all?

April 1, 2008 at 10:40 AM 
Blogger David Diano said...

This comment has been removed by the author.

April 1, 2008 at 11:46 AM 
Blogger Spencerblog said...

Fair point about tax subsidies. They should also be taken away from agri-business and farmers. There are plenty of corporate handouts that can't be justified in a free marketplace.

Ethanol has turned out to be a debacle both economically and environmentally.

But its not the low dollar that driving the price of oil. It's supply and demand. World-wide demand is up, supply not as much, so up goes the price. Pretty simply economics.

April 1, 2008 at 12:07 PM 
Blogger David Diano said...

This comment has been removed by the author.

April 1, 2008 at 9:15 PM 
Anonymous Jonas said...

David,
I like your comment but I don't agree with the article you are citing (I think I read it a few days ago). They can't explain how Exxon is going to "hold back" supply while their refineries are running at about 92-96% capacity right now. No refinery can run at 100% due to down time, repairs, etc. The article you are referring to coincidentally forgot to mention this is for Exxon as a whole throughout the world and not just the US. It is a common myth by anti-oil to talk about speculation and how it is actual price gouging. Last I checked, you could prove price gouging, and it has never been successfully proven that any oil company has done so, even with multiple congressional hearings. Yes, Exxon will be leveling off its gas refining because every other country with a brain is going to diesel fuel (remember when the diesel BMW 5 series had better gas mileage around town and on the highway than the go-green Prius???). Exxon can't just build a refinery anywhere in the world, it'll take them millions/billions of dollars in legal fees to due so. Therefore they are stuck with the issue of producing gas in Europe to ship to the US to feed our demand or feed the demand of the diesel in Europe with their operations there.

That's why there's such a difference in gas/diesel costs here as the price of gas is lower than it should be (opposite of most peoples thoughts) because the European refineries are shipping gas to the US for our use.

David is also correct that the deflation of the US dollar has effected the price of gas, but so does the increase from $40-50 a barrel to $100 in todays market. You double the price of the raw good to manufacture, keep a steady line of supply, and increase the demand by around 40-60% and the price pretty much doubles. I don't have an issue with that in a business sense. Why can I get a gallon of gas cheaper than a gallon of milk when you have to explore for crude and you buy cows (much cheaper) for milk. Then crude is shipped across the ocean and undergoes a more costly manufacturing process. Yet it's still cheaper and nobody says boo. It's almost amazing.

Could anyone explain to me why Exxon's subsidies are such an issue when they pay a higher effective tax rate (after subsidies) on revenue and net income than Walmart who had 25% of Exxon's income in 2007? Why is there no discussion as to why Walmart has MORE subsidies for each dollar of revenue and still makes "so much" money?

April 1, 2008 at 11:29 PM 
Anonymous randal said...

Good stuff, Jonas.

Everyone has been brainwashed and whipped into an emotional anti-Big Business frenzy by the Socialist LibDems while only looking at the price at the pump. Here’s the real deal. This is not spin or emotion but factual…

Big Oil is already one of the most regulated industries in the country. It costs a great deal to create their product, from exploration to drilling to shipping to refining, etc., much more than other products cost to make, and much of those costs are beyond their control. All the while they are regulated to death. Their profit margin is already government regulated –dictated at 8%- and is lower than many other industries products, like bottled water or milk, for instance. They make their huge profits on volume demand. Just because they are successful and making big profits here in this free market capitalist country does not mean that they are robbing anyone, as the Socialist LibDems would have you believe as they drool at the prospect of stealing some found money from them. The government and states make more from taxes on gasoline than the manufactures do on their own product!
And still, once one accounts for inflation, gas prices are not what they were back in the 70’s under the Carter Administration.
If you don’t like it move to some Commie craphole where everything is under even more oppressive government control, like Chavezuela.
The ONLY thing that folks can reasonably complain about is the tax breaks that Big Oil gets. Period. Not their profits.

April 1, 2008 at 11:50 PM 

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