Friday, May 08, 2009

Windfall Profits Tax

Remember when Big Oil was making all that money? Well, not anymore.

You see when the market price of the stuff you're pumping out of the ground falls by 50%, then so too do your profits. However, what also falls is ignorant, populist mentality when the price collapses and thus demand for taxing the "windfall profits" of the "evil oil industry" collapses as well. Even if Congress were to tax the evil oil companies, what profits are they going to tax? Besides, I thought everybody was bitching about bailing out companies and industries who WEREN'T profitable. Or is it the leftist's right to be an intellectually dishonest child bitching about it being to cold and then bitching about it being too hot? Precisely, my little spoiled brat child, what would be the "optimal" temperature or level of profits for these firms and what is your logical adult rationalization for that level, or are you just whining on a whim and crying like a vapid, crabby little infant for the sake of doing so?

Regardless, the point is "big oil" doesn't control the price of oil. The world economy went into recession, demand for oil tanked, and now prices have gone down. A more classical textbook example of supply and demand in economics does not exist.

But, wait, let me guess. When oil breaks $2.50 a gallon, we're going to start complaining again, aren't we?

You want a quick question to find out whether the person you're dating has the intellectual temerity and maturity to be in a long term relationship with you, ask them who controls the price of oil.

8 comments:

Goldwater's Ghost said...

Quick, man the printing presses! Big Oil needs a bailout!

CBMTTek said...

Wait a sec here.

Taxing companies excessively does not result in increased production?

That's not what the current administration is telling us.

All sarcasm aside. I find it difficult to argue against a windfall profits tax when a company like Exxon Mobil can reap $60 billion in profit a year. That's profit by they way. What's left over after all expenses and overhead.

Should it be taxed over and above regular corporate taxes? No, I really do not think so, but I can see the desire.

Jaime Roberto said...

Even sadder is that people will think that the threat of the windfall profits tax brought the price down.

Blackwing1 said...

Pretty much it's the Saudi's who control the price of oil, since they have de facto control over the supply (law of supply and demand, again). Their cost for pumping it out of the ground is still the lowest on the planet, somewhere around $2.50 a barrel.

If they wanted to flood the world with oil (but also reduce their long-term reserves in the process by extracting too much too quickly) the price of oil would plummet. But they don't want to do that.

Their goal is to keep the price of oil just barely below the point where alternatives (to industry, primarily) become cost-effective. "Oil's too expensive? We'll switch to natural gas." They're aiming to maximize their profits, just like anybody else.

Anonymous said...

OK. But the candidate you had the most good stuff to say about -- only good stuff! -- was Sarah Palin. And her signature achievement was a windfall profits tax on oil.

Anonymous said...

How do you argue against a windfall profits tax? Treat whoever argued for it as if they had just suggested they should sodomize a baby.

"Windfall" profits are not the result of unknowable mystic forces smiling upon one person and kicking the crap out of another.

They are the result of someone who went through the work of discovering a new deposit and jumping through the red tape of accessing it, or of building a new processing facility in a good location, or of devising more efficient methods of distribution, or maybe they just raised prices because they thought they could get away with it. The funny thing about even that last point is that it's likely to be invested in improvements and expansions to that business.

I am all for throwing the book at a big bad corporation if a properly conducted investigation reveals that there has been an actual crime. But whining simply annoys me.

Hot Sam said...

@ignorant anonymous

Sarah Palin did NOT impose a windfall profits tax. She negotiated higher royalties for her STATE's oil supplies when the periodic review of those rates occurred. Oil prices were up, so Alaska's oil was more valuable. Hence, they charged a higher price for it.

She also did not "spread the wealth" through redistribution. Alaska's Permanent Fund Dividend is also adjusted from time to time, and it was time for a large increase for Alaskans who OWN that oil.

When George Bush was CEO of Arbusto, oil prices had tanked and he saved the company when many went under. No one was offering any bailout money back then.

amcz said...

Maybe we should have a Windfall Government Spending Tax. Basically, if a company takes money from the government, we can barge into their head offices and piss all over the board of directors.

(I'm not quite sure how urination counts as a tax; though, in olden days, farmers just gave a fraction of their produce to church and/or the government.)