SENATE HOLDS HEARING ABOUT OIL COMPANY PROFITS

As a Republican I am ashamed that my parties majority caved into demands from the Democrat minority to call oil company executives, "on the carpet, " so to speak because of third quarter profits. The announcement of record profits caused a stir in Washington and rather than take the bull by the horns and lead, the majority has caved into the left and played on the aggravation of consumers who have been bombarded with media and liberal hype that doesn't begin to tell the truth about WHY profits were as they were. First, I thought in a free market economy that individual companies and the supply and demand market were what determines pricing and not Senators who are touting a windfall profit tax on oil companies to garner votes based on half truths and incomplete information. This applies to BOTH parties ! If a windfall tax is applied, who will pay for it ? We will for when taxes are raised the business community, regardless of whether it is the corner grocer or big oil, have no alternative but to pass the excess onto the consumer. Second the profits that were reported are based on inventory profits. All oil companies have an oil inventory of several MILLION barrels that are used to keep refineries working at 100% capacity. When the oil is removed from the inventory to be refined it has to be replaced to keep inventories at proper levels. If the oil that was removed from inventory for refining was purchased at $40 a barrel and the current per barrel cost is $60 then two things happen. As the per barrel price rises the oil company is forced to raise its inventory to that price which causes a huge profit margin. The reason for the increase is because that oil has to be replaced at current market prices thus the excess profits actually are on paper profits only due to re-stocking the inventory. This does NOT equate to price gouging at the pumps as has been suggested by these Senate hearings. A second reason for this being an on paper profit only is that as prices go up due to supply and demand so do distribution costs which are ALSO paid by oil company , "profits." If these Senators want to investigate where the gouging is then they need to look no further than Washington and the more than 40 cent per gallon federal tax on gas. The oil executives made no apologies for the profits and have no reason to. The price at the pump is heading down even as this post is being written. Why ? It is a direct result of a free market, supply and demand economy which is decided by consumer purchases and company operations as it should be and NOT by the collective, "wisdom, " and politicking of elected officials in Washington!

Ken Taylor