I have a question for idiots like Durbin decrying the "windfall" profits of Big Oil(tm)

Where the f*ck has he been for the last several years when the price of housing went up between 100-300% and people were speculating...buying houses, sitting on 'em, and flipping them?

I want to see him broach the subject of taxing THAT "windfall" profit.

yeah. right.

Did Russert sleep through Economics 101?

Seriously, I never even took Econ in college, and I understand supply and demand. From high school!

And Durbin (my Senator) may be worse, but not more dumb. He understands this stuff, he's just trying to capitalize politically on people's unease about gas prices. If you say you want to punish the oil companies for gas prices, you will get votes. You'll notice a lot of politicians are getting on that bandwagon, from both sides of the aisle.

Here's my prediction, gas prices will not go down, ever. They will go up as demand is going up worldwide. Our priveleged position having cheap gas is gone (even though we're still gonna get cheaper gas than in Europe). Get used to $3+ per gallon.

It's time to get serious about alternatives (and yes I also mean for environmentalists who don't like nuclear or wind farms), as no possible amount of expanded drilling here is going to bring the price down (it may, repeat may, merely slow the increase by a very small margin).

"Cost of crude $1.71 per gallon (delivered)"

Oil produced on U.S. soil is considerably cheaper than oil imported from outside the US these days. When the cost of imported oil rises, the price of gasoline rises, even though the cost of gasoline produced from oil pumped on U.S. soil has not increased.

The increased profit on domestically-originating gasoline is a WINDFALL. The WINDFALL PROFITS made from the gasoline produced on U.S. soil is the subject of the "Windfall profit tax" discussion.

When are these Wizbang! writers going to get off the Republican "talking points" and read and undestand the issues... for a change?

and why are the blogs sponsored by the Republican VolPacs so interested in protecting the profits of oil companies?

Oil produced on U.S. soil is considerably cheaper than oil imported from outside the US these days. When the cost of imported oil rises, the price of gasoline rises, even though the cost of gasoline produced from oil pumped on U.S. soil has not increased.
The increased profit on domestically-originating gasoline is a WINDFALL. The WINDFALL PROFITS made from the gasoline produced on U.S. soil is the subject of the "Windfall profit tax" discussion.

Lee:
First, the oil commodities market is a fungible market, and traders don't care whether the oil is domestically produced or not. Traders (not the oil companies) set the market price.

You moan about the WINDFALL profits, yet you are strangely silent about the period during the 80s when the bottom fell completely out of the oil industry due the crashing of the price of oil. Production (domestic) dropped dramatically. It was far cheaper to buy the oil off the market than to expend money to drill here (and to deal with the regulatory-enviromental lobby headaches that it involved.) Oil companies lost lots of money then.

You also seem to think that this profit is going to be tucked under some CEO's queen-sized mattress to be saved for a rainy day. Well, no, sunshine, it is used for more exploration/refining.

Need I also remind you that when the oil company profits go up, so do the shareholder's stocks and dividends. Many, MANY, 401-Ks and retirement plans are involved in such stocks. What hurts the oil companies will ultimately hurt shareholders, and those whose retirement incomes are invested in such stocks.

Finally, the oil companies make their profits not solely on gasoline/petrol, but also other energy efforts, jet fuel, plastics (you realise that plastic comes from hydrocarbons such as petroleum?)

And we don't produce as much domestically as we could anyway, thanks to above regulatory-enviromental lobby matters. And, again, demand has skyrocketed in Asia (particularly India and China--that's some 12 billion people over there). Even a high-schooler can figure out that when demand rises, and supplies stay the same or decrease, prices rise. Solution: Decrease demand (through fuel efficiency, though that won't make much of a dent considering the Asian market is not interested in efficiency) or increase supply (via more domestic drilling, offshore and on land, and we know who's gonna stop that, don't we?)

Could Russert be any more stupid? This is a free market Timmy, people don't set prices in a free market. Duh!

Also to add, a profit of 8-9% is hardly impressive, let alone a windfall.

If you take a look at this chart(scroll down):

http://www.freemarketproject.org/news/2005/news20051102.asp

...you will note that for all except three years, government taxes far outpaced profits, and these are at the pump taxes, not counting the usual corporate income taxes on top of that. If anyone has been making money hand-over-fist in oil money, it's been our government.

From the same article:
"    For its part, Exxon has reported that it had new capital investments approaching $15 billion in 2004, which went toward new exploration and production as well as refining capacity and research for new energy technologies. "

     Also, Exxon spokesman Mark Boudreaux told the Free Market Project that "ExxonMobil has added 384,000 barrels per day of refining capacity in the United States through expansions, technology, and operational improvements over the last 10 years."

     "The average refinery size in the U.S. is about 125,000 barrels per day [Oil & Gas Journal numbers]," Boudreaux said. "So that means we have in effect built the equivalent of three new grassroots refineries over the last decade."

     Building and expanding refineries isn't cheap. The Cato Institute's Peter Van Doren and Jerry Taylor wrote on June 4 that a large refinery can take $4 billion to $6 billion to build."

That Billion with a "B". And that's for ONE refinery.

Now, sure, you can punitively "windfall tax" the shit out of Exxon. That ain't gonna help with the gas prices, in fact, it will exasperate things even more. No more refineries or new exploration, supply does not increase, yet demand will continue to rise. Result: HIGHER prices.

Frankly, the price of gas/gallon has been way underpriced for the longest time, especially during the late 80s-90s. We are damned lucky we got that gas so cheap. The market has pretty much corrected, so don't expect to be seeing $1.50 prices very soon, unless the world is FLOODED with crude.

"First, the oil commodities market is a fungible market, and traders don't care whether the oil is domestically produced or not. Traders (not the oil companies) set the market price."

And the profit on gasoline produced from domestically-produced oil takes a huge jump - a windfall.

"You moan about the WINDFALL profits, yet you are strangely silent about the period during the 80s when the bottom fell completely out of the oil industry due the crashing of the price of oil. Production (domestic) dropped dramatically. It was far cheaper to buy the oil off the market than to expend money to drill here (and to deal with the regulatory-enviromental lobby headaches that it involved.) Oil companies lost lots of money then."

Why are you changing the subject. We were talking about the windfall profis received by the oil companies during the last 3 months. Nothing that has happened in the past, especially 25 years ago, entitles the oil companies to windfall profits now -- do you really have the nerve to suggest that we OWE the oil companies? Lol! Whose paying your salary?

You also seem to think that this profit is going to be tucked under some CEO's queen-sized mattress to be saved for a rainy day. Well, no, sunshine, it is used for more exploration/refining."

That's Mr. Sunshine to you... and since everyone pays taxes on profits, including you and me, so should the oil companies. We arent' talking about tax incentives for exploration -- we're talking about Windfall Profits, moonbeam.

"Need I also remind you that when the oil company profits go up, so do the shareholder's stocks and dividends. Many, MANY, 401-Ks and retirement plans are involved in such stocks. What hurts the oil companies will ultimately hurt shareholders, and those whose retirement incomes are invested in such stocks."

Lol! - What are you doing -- cutting and pasting straight out of the VolPac newsletter? So everyone should pay too much for gasoline so that the shareholders cna receive a better profit - be sure to put that into the Repubulican platform!

(wait a minute -- it already is... never mind)

We're only talking about Windfall Profits on gasoline -- remember?

"And we don't produce as much domestically as we could anyway, thanks to above regulatory-enviromental lobby matters. And, again, demand has skyrocketed in Asia (particularly India and China--that's some 12 billion people over there). Even a high-schooler can figure out that when demand rises, and supplies stay the same or decrease, prices rise. Solution: Decrease demand (through fuel efficiency, though that won't make much of a dent considering the Asian market is not interested in efficiency) or increase supply (via more domestic drilling, offshore and on land, and we know who's gonna stop that, don't we?)"

The price of oil is rising worldwide. Yes, even you have that one figured out -- but here the issue is Windfall Profits on gasoline produced from domestic production.

there was a lot of the same noise and misdirection, and then:

"Frankly, the price of gas/gallon has been way underpriced for the longest time, especially during the late 80s-90s. We are damned lucky we got that gas so cheap. The market has pretty much corrected, so don't expect to be seeing $1.50 prices very soon, unless the world is FLOODED with crude."

At last, the truth. You've got that right at least. The Republican oil man in the White House has set this nation up to be screwed. We will have $3+ gasoline forever. It's only going to get worse.

The screwing of America has begin full-tilt, and the amazing thing is... if you're dumb enough to click on those ads on the left rail of this blog, and do an even dumber thing and donate money to these wolves, you are paying for the privilege of being screwed, and helping them screw your fellow Americans in the process.

What did this country ever do to you to deserve that kind of treatment?

Are Russert and Durbin truly stupid or willfully stupid?
Perhaps the Secretary should have asked Russert if NBC is making a "windfall profit" when it charges more for it's higher rated shows than for it's lesser rated shows?
If the Lee's want to be Exxon's partners in the profits by way of windfall profits taxes, do they want to be their partners when the next profit bust happens by way of guarantee minimum profit surcharges? Somehow I doubt that.
Besides is it not a lefty talking point that high prices aid conservation and decrease pollution?

Lee, you missed the big picture that James was making. The oil companies don't determine their profits. This is market economics, oil companies have no control over their prices therefore they have no control over their profits. Since prices are not set by anybody, all you can do is blame the invisible hand.

"Lee, you missed the big picture that James was making. The oil companies don't determine their profits. This is market economics, oil companies have no control over their prices therefore they have no control over their profits. Since prices are not set by anybody, all you can do is blame the invisible hand."

Oh, when it comes to blame I think I've made my point....but you know -- the real subject of the post on which we're commenting is --

-- Windfall Profits on gasoline refined from domestic production.

Sorry, I just had to do that. It's that whole "big picture" deal right back at ya', pal. We can discuss how much; we can discuss what is fair -- but let's stay focused here, ok?

It doesn't matter who determine's the profit -- we're discussing taxing it; regardless. The "blame" is moot.

It doesn't matter who determine's the profit -- we're discussing taxing it; regardless. The "blame" is moot.

But Lee, the profits are already taxed. So, I'm confused on what your point is.

I'm losing sight of the distinction between socialism and capitalism anymore. How can oil be called a private industry when the government makes more than 7 times as much profit as the oil companies? As China privatizes industries and we tax them to death at what point do we pass each other and we become the socialist country and them the capitalists?

hey Lee

All first time buyers that have been shutout of the housing market because of huge increases in price (and windfall profits for home sellers that make the oil companies look like a lemonade stand run by Lucy Van Pelt) certainly have been hurt by greedy homeowners.

"Blame" is moot. When are you proposing taxing those "windfall" profits?

Darleen: Have you read a word in this post? You say "greedy homeowners." What do you mean by this? Homeowners don't set their prices, the market does.

I posted this in the wrong thread before, let's see if I can do better here:

To counter Lee's rather short-sighted arguments:

And the profit on gasoline produced from domestically-produced oil takes a huge jump - a windfall.

Exxon (to pick one company) had a $11 billion dollar increase in profits...a big jump to be sure, however:

http://money.cnn.com/2006/04/27/news/companies/exxon/

"...they've also returned lots of the profits to shareholders.
Exxon returned $7 billion to shareholders in the form of dividends and share buybacks in the first quarter of 2006, a 67 percent increase from the prior year."

As I've mentioned, more profits results in more money going back to shareholders, many of which are retirement funds.

Also in the article:

"In its earnings statement, the company [Exxon] said it spent $4.8 billion on capital investment and exploration projects this quarter."

As I also mentioned, the profits don't sit under a mattress (or on it for the CEO to laciviously roll around in, they are used to fund further projects to (gasp) earn MORE profit! Horrors!

In other words, what's the fucking problem with making some money, especially after LOSING money after nearly a decade?

Why are you changing the subject. We were talking about the windfall profis received by the oil companies during the last 3 months. Nothing that has happened in the past, especially 25 years ago, entitles the oil companies to windfall profits now

1. It has everything to do with the subject, if you consider making a tidy profit after suffering profit losses for YEARS a "windfall". And, yes, with all the investement that the companies have made in exploration/drilling, etc, and the BILLIONS of money that they've spent on it, damn right they have the right to earn some of it back.

-- do you really have the nerve to suggest that we OWE the oil companies? Lol! Whose paying your salary?

2. If you are willing to buy the product at the price set, yes you OWE the company, unless you are suggesting that they give it away for free.

3. Paychex pays my salary, which has nothing to do with the subject at hand (talk about changing subjects)

That's Mr. Sunshine to you...

Be grateful that I didn't use my second, more scatological title instead...take what you can get.

and since everyone pays taxes on profits, including you and me, so should the oil companies.

And they DO, you half-wit:

http://www.taxfoundation.org/news/show/1321.html

"It is important to remember that net income reported on financial statements, is the result of subtracting income-based taxes from corporate gross earnings. Before shareholders receive a return on their investment, the government takes its significant share off the top...During 2005, these three companies paid a combined corporate income tax burden of $44.3 billion on their reported gross earnings. Compared to last year's combined corporate income taxes of $29.7 billion, their burden for 2005 has increased by 49.2 percent and follows the overall trend of escalating corporate tax collections in the United States. In addition to corporate income taxes, the same companies paid or remitted over $114.5 billion in other taxes in 2005, including franchise, payroll, property, severance and excise taxes."

There's also a handy chart at the link, showing that the average Corporate Income Taxes of ConocoPhillips, Chevron and Exxon Mobil per Share Exceed 69 Percent of Net Earnings per Share

Read the article carefully before you spout off such unbelievable nonsense.

Lol! - What are you doing -- cutting and pasting straight out of the VolPac newsletter? So everyone should pay too much for gasoline so that the shareholders cna receive a better profit - be sure to put that into the Repubulican platform!
(wait a minute -- it already is... never mind)

1. I don't know who VolPac is, and if it exists I challenge you to find said cut-and-paste, with URL (you will note I have been citing my sources here).

2. Define "too much." What is too much? $1.00? $2.00. My aunt in Esher pays about 70p/litre...that's about $4.50/gallon, of which 70% of it is due to road tax. Consider yourself lucky you are only paying $2.70 here.

We're only talking about Windfall Profits on gasoline -- remember?

As I stated, the profits announced by Exxon, come not ONLY from gasoline/petrol. They are TOTAL profits, which include plastics, etc. AT&T doesn't JUST do long-distance service anymore either.

ME:
"And we don't produce as much domestically as we could anyway, thanks to above regulatory-enviromental lobby matters. And, again, demand has skyrocketed in Asia (particularly India and China--that's some 12 billion people over there). Even a high-schooler can figure out that when demand rises, and supplies stay the same or decrease, prices rise. Solution: Decrease demand (through fuel efficiency, though that won't make much of a dent considering the Asian market is not interested in efficiency) or increase supply (via more domestic drilling, offshore and on land, and we know who's gonna stop that, don't we?)"

SUNSHINE:
The price of oil is rising worldwide. Yes, even you have that one figured out -- but here the issue is Windfall Profits on gasoline produced from domestic production.

1. Of course I figured it out, I use logic, not some left-tract whining talking point.

2. No, the issue being pushed in the media is "windfall profits" in general, not specifically from domestic sources. And, by the way, all of our gasoline is domestically produced, pretty much...that's where the refineries are, HERE.

You don't have to like paying more for your gas than you did 2 years ago, neither do I, but welcome to the free market. It could be much worse: In the 70s, thanks to a shortage of crude AND GOVERNMENT PRICE FREEZING, the overall price rose even higher (in 70s dollars), long queues, odd/even day rationing, and a 10 gal limit on gas (when at the time, most tanks took 20 gals and got, at best, about 10 miles/gallon.)

So, save your complaints until you see that sort of nonsense happening again.

At last, the truth. You've got that right at least. The Republican oil man in the White House has set this nation up to be screwed. We will have $3+ gasoline forever. It's only going to get worse.

Obviously you don't know your history, when Reagan abolished the price freezes in the 80s, initially the prices went UP! Then, OPEC began to flood the market with crude, driving the prices down to the basement. We were producing far more fuel-efficient cars then, and our demand for oil went down, the Saudis couldn't sell their crude at the previous price-freeze prices. Demand went down, supply went up, prices dropped. Econ 101.

Lee,

Come on man, James has addressed your points, but apparently you need to be beaten over the head with it to understand. The windfall tax on domestic oil was tried in the 1980s, with drastic results. It only proved to stifle domestic production (20-year low as of 1988) and increase our dependency on foreign oil, and the tax yield was nowhere near the revenue anticipated. The windfall tax on domestic oil was a burden on taxpayers, on industry, and helped to increase our dependency on the Middle East. Cloninger did not change the subject, he was pointing you to the results of what you propose. 'Those who cannot remember the past are condemned to repeat it.'

And yes, I'm a lefty, but I'm a free-market lefty (on most issues except for those crucial to social well-being, like education and health care). And let me just throw some (possibly) unexpected red meat to the conservatives here: regarding the windfall tax on oil production, Carter was dead wrong, Reagan was absolutely right, and economic history has proved this thru and thru.

I for one like high gas prices, they only serve the environmental cause (if not the cause of radical environmentalists).

Ok, I took to long, and James covered it, but still...

Lee, you missed the big picture that James was making. The oil companies don't determine their profits. This is market economics, oil companies have no control over their prices therefore they have no control over their profits. Since prices are not set by anybody, all you can do is blame the invisible hand.

Well, I tried to give a little insight into how global markets work, but obviously Lee has decided to remain woefully ignorant about basic market econ. Even IF all of a sudden tomorrow, the government was to sweep in and take all of the profit away, it's not going to make the price come down. All it means is that the incentive to build refineries and drill here domestically is wiped out. Result: IMPORTING CRUDE AND GASOLINE, resulting in HIGHER prices (after all, the companies will have to recover their lost income somehow, and the first thing they will do (after moving all their operations out of the country) is raise the price of gasoline to recoup.

Problem gets monumentally bigger.

James: I appreciate your detailed reply to Lee's radical left diatribe, but I'm afraid you veered a little off subject.

MR. RUSSERT: But that's a decision by the oil companies.

MR. BODMAN: No, it is not. That is a decision--those are--oil is traded every minute of every day, and it's traded basically 24-by-seven. And it's, it is determined in marketplaces in New York and London and Tokyo, all over the world. That's the, the--the oil companies do not determine the price of oil; the producers determine the price of oil.

The whole point of the post is that the oil companies do not set the price of their product - be it oil or gasoline. I feel that you are overcomplicating the issue and confusing people. If we are to reach out and bring other people into the fold we need to keep things simple and explain how the free market works. Apparently it's a hopeless cause with media hacks like Tim Russert, but I truly believe that we can reach people like Lee.

mantis:

And yes, I'm a lefty, but I'm a free-market lefty

Since we agree, even though we are opposite sides of the spectrum politically, that must mean the End Times are upon us. :)

Ok, I took to long, and James covered it, but still...

I left out the windfall tax of the 80s in my points, I'm glad you pointed out that THIS HAS BEEN FUCKING DONE BEFORE! It only butresses my point.

The whole point of the post is that the oil companies do not set the price of their product - be it oil or gasoline. I feel that you are overcomplicating the issue and confusing people. If we are to reach out and bring other people into the fold we need to keep things simple and explain how the free market works. Apparently it's a hopeless cause with media hacks like Tim Russert, but I truly believe that we can reach people like Lee.

This has not been the first time that it's been explained how market forces work. Perhaps I went a little too much in depth, but I do like to explain things somewhat thoroughly. If Lee can't grok it by now, or is too lazy to do some research, well, I hope he doesn't have to run a business.

I left out the windfall tax of the 80s in my points, I'm glad you pointed out that THIS HAS BEEN FUCKING DONE BEFORE! It only butresses my point.

It thought you were implying that here:

You moan about the WINDFALL profits, yet you are strangely silent about the period during the 80s when the bottom fell completely out of the oil industry due the crashing of the price of oil.

But no matter. Happy to help.

It thought you were implying that here:

Yes, but you explained WHY the bottom dropped out more succinctly.

Since we agree, even though we are opposite sides of the spectrum politically, that must mean the End Times are upon us. :)

Hey, I'm a lefty; that means I'm a no-good secular humanist/darwinist. I don't believe in the End Times. Hedonism for all! ;)

Lee: I was thinking about how to explain the market to you so you can understand it. I'm not quite sure what your background is, but let me give it a shot:

Have you ever seen the oil companies raise the gasoline prices? No, of course not. You drive up to the pump and the price is what the price is.

So, who is setting the price? You can't see who is setting the price yet the price has changed.

Now, let's try this. You are driving down the street and see a building. The building is there, but what put it there? Easy, right? A builder. The mere fact that there is a building proves the existence of a builder.

How about if you visit a museum and see a painting? What made the painting? Obviously it was a painter.

But, you don't actually have to see the builder building or the painter painting to know that they exist. The mere existence of the building and painting is proof of the existence of the builder and painter.

Likewise, that fact that there is price for gasoline proves beyond a doubt that there is an invisible hand controlling the market.

Does this help? I'm never quite sure how to approach the subject as I meet many different people on the internets, each with a difference level of education and exposure to the marketplace.

Now, let's try this. You are driving down the street and see a building. The building is there, but what put it there? Easy, right? A builder. The mere fact that there is a building proves the existence of a builder.

How about if you visit a museum and see a painting? What made the painting? Obviously it was a painter.

But, you don't actually have to see the builder building or the painter painting to know that they exist. The mere existence of the building and painting is proof of the existence of the builder and painter.

Wow, I've never heard "intelligent design" arguments applied to economics. Kirk, you wouldn't be a total nutcase, would you? Let's look at your latest post:

This must end. People must not be allowed to speak ill of our president in a time of war. But, it is not enough to just muzzle the voices; we must also remove all symbols of dissent.

Wizbang, welcome to crazytown. Just follow the link.

Ok, nevermind, Kirk's site is obviously a joke. I'm retarded.