Friday, April 28, 2006
A FEW MORE OILY WORDS
Readers and television watchers have been bombarded by oily rhetoric on the subject of gasoline prices. Please permit the Militant Moderate to add a few oily sentences to that cache of slippery information and elusive logic.
Citizens are told time and again that our gasoline pricing problems are a result of the simple economic law of supply and demand. Demand is increasing worldwide at a faster pace than supply can meet. No doubt this principle applies in a macroeconomic sense. What about the intricacies of the details?
Justifiably, some are suspicious of our government's inaction when we have "oilies" for president and vice president, and when many of our congressmen are beholden to oil interests and oil lobbyists for campaign money. Some recall that our government's laissez faire energy policies were written in secret collusion of oil executives with former Halliburton CEO, Vice President Cheney. Lawsuits to open up those records were blocked by Cheney's hunting buddy on the Supreme Court, Justice Scalia.
The American people have some basis for wondering if their government's actions or inactions are in their best interest or in the interest of the oil industry.
As usual, some members of both political parties are posturing and pandering to the press with ineffectual ideas on alleviating citizens' pain at the pumps. A $100 tax rebate, or cutting the 18.4 cents federal tax temporarily, makes no real sense. Drilling in the Anwar will be too little too late. Changing Middle East politics presents a challenge, but no permanent solution either. Changing our source of fuel to natural, renewable sources will take several years, but current prices will accelerate development of alternative fuels which may ultimately be part of the answer. Restrictions on gas guzzlers and new technologies will take time, but those will help.
The public is outraged by the obscene profits of oil companies. Exxon made $8.4 billion and Chevron $4 billion in profits just this past quarter. The Exxon CEO was given a $400 million retirement package. Consumers paying $3 a gallon at the pumps are understandably hostile.
What about whispers of a "windfall profits" tax? Mr. Bush says, "No." While this would do nothing to increase the supply of oil, or to reduce the demand, it might tend to put some restraint on the price of gasoline at the pump? Why? The idea is worth evaluating, even if it raises the hackles of oil people.
Oil companies were having some difficulties making a profit when domestic oil was less than $15 a barrel. Domestic oil royalty owners, producers, transporters, refiners, and distributors were all making reasonable profits from $25 oil, and they were doing exceptionally well with oil at $35 a barrel. The presumption could be made that profits from domestic oil prices, rising with the international market to nearly $75 a barrel, have about $40 of excess profits for somebody on that domestic portion. There may be little excess profits on the imported oil supply.
It seems to the Militant Moderate that some mix of experts in cost accounting, tax law and accounting, economists, and persons knowledgeable of the oil industry should be able to work out a windfall profits tax application to tap the undeserved income from this profiteering at the expense of the consumer. As a general principle, the MM would boldly suggest that at least half of these excess profits from domestic oil should be rebated to the government in taxes.
Such a windfall tax might yield as much as $100 billion a year. Such an amount would certainly help to reduce the annual deficit that is mortgaging the future of our country. Further, the absence of unregulated, uncapped profits, and introduction of accountability, might provide negative incentives for price gouging at each step in the production and sale of gasoline.
American consumers would certainly be less distraught if they knew that the oil companies were really feeling their pain -- even a little.
Dr. Edwin E. Vineyard, AKA Militant Moderate
Readers and television watchers have been bombarded by oily rhetoric on the subject of gasoline prices. Please permit the Militant Moderate to add a few oily sentences to that cache of slippery information and elusive logic.
Citizens are told time and again that our gasoline pricing problems are a result of the simple economic law of supply and demand. Demand is increasing worldwide at a faster pace than supply can meet. No doubt this principle applies in a macroeconomic sense. What about the intricacies of the details?
Justifiably, some are suspicious of our government's inaction when we have "oilies" for president and vice president, and when many of our congressmen are beholden to oil interests and oil lobbyists for campaign money. Some recall that our government's laissez faire energy policies were written in secret collusion of oil executives with former Halliburton CEO, Vice President Cheney. Lawsuits to open up those records were blocked by Cheney's hunting buddy on the Supreme Court, Justice Scalia.
The American people have some basis for wondering if their government's actions or inactions are in their best interest or in the interest of the oil industry.
As usual, some members of both political parties are posturing and pandering to the press with ineffectual ideas on alleviating citizens' pain at the pumps. A $100 tax rebate, or cutting the 18.4 cents federal tax temporarily, makes no real sense. Drilling in the Anwar will be too little too late. Changing Middle East politics presents a challenge, but no permanent solution either. Changing our source of fuel to natural, renewable sources will take several years, but current prices will accelerate development of alternative fuels which may ultimately be part of the answer. Restrictions on gas guzzlers and new technologies will take time, but those will help.
The public is outraged by the obscene profits of oil companies. Exxon made $8.4 billion and Chevron $4 billion in profits just this past quarter. The Exxon CEO was given a $400 million retirement package. Consumers paying $3 a gallon at the pumps are understandably hostile.
What about whispers of a "windfall profits" tax? Mr. Bush says, "No." While this would do nothing to increase the supply of oil, or to reduce the demand, it might tend to put some restraint on the price of gasoline at the pump? Why? The idea is worth evaluating, even if it raises the hackles of oil people.
Oil companies were having some difficulties making a profit when domestic oil was less than $15 a barrel. Domestic oil royalty owners, producers, transporters, refiners, and distributors were all making reasonable profits from $25 oil, and they were doing exceptionally well with oil at $35 a barrel. The presumption could be made that profits from domestic oil prices, rising with the international market to nearly $75 a barrel, have about $40 of excess profits for somebody on that domestic portion. There may be little excess profits on the imported oil supply.
It seems to the Militant Moderate that some mix of experts in cost accounting, tax law and accounting, economists, and persons knowledgeable of the oil industry should be able to work out a windfall profits tax application to tap the undeserved income from this profiteering at the expense of the consumer. As a general principle, the MM would boldly suggest that at least half of these excess profits from domestic oil should be rebated to the government in taxes.
Such a windfall tax might yield as much as $100 billion a year. Such an amount would certainly help to reduce the annual deficit that is mortgaging the future of our country. Further, the absence of unregulated, uncapped profits, and introduction of accountability, might provide negative incentives for price gouging at each step in the production and sale of gasoline.
American consumers would certainly be less distraught if they knew that the oil companies were really feeling their pain -- even a little.
Dr. Edwin E. Vineyard, AKA Militant Moderate
