The Liberal Lie, The Conservative Truth

Exposing the Liberal Lie through current events and history. “Republicans believe every day is the Fourth of July, but the democrats believe every day is April 15.” ****** "We will always remember. We will always be proud. We will always be prepared, so we may always be free." RONALD REAGAN

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Two Reagan conservatives who believe that the left has it wrong and just doesn't get it!

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HISTORICAL QUOTE OF THE WEEK - "Always bear in mind that your own resolution to succeed is more important than any other." ABRAHAM LINCOLN

Monday, April 24, 2006

WINDFALL PROFIT TAX ? WHO PAYS - THE CONSUMER

Calls to place a windfall profit tax on oil companies is starting to raise its ugly head again. The most recent to cry this is Senator Arlen Spector, (R -sort of-PA). Of course this is political manipulating by any Congressman or Senator who cries for this windfall tax because they believe it plays well with the voters especially in an election year on a subject that effects everyone; high gas prices. Realistically no business actually pays any taxes. They may actually send the check, so to speak, but the cost of the tax is passed on to the consumer through higher prices which is exactly what a windfall profit tax on oil companies would do. Additionally the profit on a gallon of fuel is 8.3 cents as compared to most business' that average 12 to 15 cents on something of the same value as a gallon of gas. If Congress is looking for someone to, "punish, " for high gas prices they need look no further than their own backyard. Taxes on every gallon of gas is at least 50 cents and higher in states that place a more substantial state tax such as New York which takes the tax per gallon over 60 cents because of state taxes. Placing a moratorium on the federal portion of the gasoline tax which is about 40 cents would have a greater impact on the price of fuel that a windfall tax which would increase the price. Regulations also create a huge difference in a gallon of gas because of the fuel additives that are required by the government. For instance the current escalation of fuel cost is due to switching from winter fuels to summer fuels which causes two problems that interrupt the supply. First storage facilities must be shut down in order to allow cleaning for the change which delays delivery of fuel to distributors. Plus because of the regulation for different fuel additives in the summer, refineries cannot stockpile fuel as they prepare for the change which again causes a disruption in the distribution. Supply and demand plays a big role but government interference through regulation and tax creates as great a problem as supply and demand. Add to this the regulations which prevent drilling in the Gulf and other locations in the United States and the fact that refining facilities have not increased in 28 years because of environmentalists reveal that the true problem is not big oil but government intervention. Now the proposal for more intervention through a windfall profit tax. To answer you on the left who will counter much of what I have written with the retirement packages for executives in the oil companies and the record profit margins I say this. Yes 400 million dollars is a bit much for retirement but that figure would not make a dent in the fuel prices. Additionally this is also part of any corporate structure and contract with executives in any company yet I don't hear anyone whining about the retirement packages of GM or Ford executives for example. Profits are also based on the cost to replace oil that has been used. If the oil that is being replaced cost 10 dollars a barrel more than what it is replacing while prices at the pump are high than this is only a profit on paper or an inventory profit. The answer to the gas problem in the immediate is for the government to place a moratorium on their taxing of fuel and relax regulation to allow stockpiles to increase and stop interrupting the distribution flow. Second allowing drilling in the Gulf, Anwar, (which by the way will NOT hurt the environment) as well as other locations to decrease our dependency on foreign oil. Get government out of the way and we will see prices decrease drastically!

Ken Taylor

18 Comments:

Blogger Rob said...

Ken, there is evidence that oil companies are using the higher prices of oil to increase their profit margins at the expense of consumers.

In 2003 and 2004, Exxon Mobil's corporate profits were about 8.5%, last year they were at 10%

BP averaged profits of about 5%from 2002-2004, now it has a net profit of 8%.

Every oil company is benefitting from higher prices, and tax breaks given as part of Bush's energy bill. There isn't a single oil company that I know of that has not seen its profits rise significantly over the last two years. The oil industry invites regulation and investigation of its practicies when it throws out the huge pension and salary packages to its executives.

I don't know enough about the oil industry to say with certainty that they are gouging, but I can read publicly available financial statements and see that there is supporting evidence that it is happening. Oil firms are greatly benefitting from higher prices. If they were not, their profit margins would not be increasing so significantly.

Certainly government inquiries are warranted.

9:13 AM, April 25, 2006  
Blogger The Liberal Lie The Conservative Truth said...

I realize that oil companies are making a profit and that they are benefiting from that profit otherwise they would not be in business. My point in the post was that before the government starts going after oil companies they need to look at the ridiculous over taxation of a gallon of gas. 50 cents per gallon is way over the top and can be reduced. The profit that the oil companies make on a gallon 8.3 cents is very small in comparison to what other corporations make on someting of the same price value. The difference is that gas prices effect everyone who drives whether for business or pleasure. Adjusting for inflation we are still about 70 cents to a dollar below the price of the 70's. But because it is the oil companies there is a cry in Washington of gouging. Every company regardless of the product over charges. The last time that the government stepped in during an oil crises under Carter the result was a disaster as a price cieling was set and it nearly destroyed the oil companies which forced the smaller companies to merge with the larger ones to survive and now a resemblance of a monopoly exists which also effects the market. Anytime government gets involved in private business disaster follows.

Ken

7:25 PM, April 25, 2006  
Blogger Rob said...

I don't know if there is gouging going on, and I have no problem with oil companies making profits.

However, I do have a problem with them increasing their margins and paying out new, exhorbitantly high salaries and pensions to executives.

This begs for investigation.

9:23 PM, April 25, 2006  
Blogger MDConservative said...

A company wants to pay someone a large amount of money, how is that any of your concern Rob? Unless you are a large shareholder, it really isn't. In addition, he was there for 43 years and made money for those with 1,000's or millions invested.

You have gone as loony on this as Mr. No-Spin himself.

The people want action, they want lower gas prices and want the government to do something about it. Maybe not all, but there are people that just want to take it from the companies. Just take it. Give it to others. The Govt. cannot do that. They can investigate, but that won't do a thing for the time being.

Instead of playing that game, they can actually make a difference in the price OVERNIGHT!!! Like Ken said, taxes. You lower or suspend gas taxes on all 3 levels, BOOM, lower prices at the pump. There, that doesn’t even involve investigations and would actually help fix the problem.

6:37 PM, April 26, 2006  
Blogger The Liberal Lie The Conservative Truth said...

Amen MD ! As I said ANYTIME the government gets involved with anything disater follows. Take government out of the equation, even the taxes, and inprovment follows!

Ken

7:56 PM, April 26, 2006  
Blogger Rob said...

Exhorbitant pay and increased margins invite scrutiny. They are free to pay whatever they want to whomever they want, but they should not be surprised that the public and our government wants to have a look at possible gouging.

You want to cut taxes on oil companies further? Why? So Exxon Mobil can have $45 billion in profit rather than $40 billion this year?

Explain to me how we have benefitted from the $16 billion in tax breaks oil and energy firms got from Bush's energy bill. We have record government spending, a record national debt, record deficits, and record borrowing from foreigners to pay for our government's out of control spending. Cutting taxes on big oil will only make our government's deficits even larger.

You do realize that when we run government deficits, we cannot just print more money. Our government borrows it and then taxpayers pay it back with interest.

9:36 PM, April 26, 2006  
Blogger Vern1966 said...

Liberal, here. First of all, let me say that I don't support excise profits tax of any kind. It's un-American and won't actually achieve anything. Second of all, be careful what you wish for. The high prices at the pump are forcing people to change behaviors that have been costly to the environment and to our own security for too long. This opportunity to make real changes in how we power the engine of our economy should be approached thougtfully, not by knee-jerk reaction. Instead of punitive measures designed to lure us back to the oil company teet, we ought to be embarking on major nationalized initiatives to create and distribute alternative energy sources (refer to the Apollo Alliance, a Democratic initiative) and expand mass transit networks. And I find it both shortsighted and sad that you consider the price of drilling in protected lands to be secondary to an increase in the cost of gas. To me, protecting what is left of our environment is by far more important.

1:00 PM, April 27, 2006  
Blogger MDConservative said...

Rob, I am talking about the Tax the federal government and state get at the pump. Make it so the consumer is not paying $2 in gas and $1 on tax for every gallon.

10:52 PM, April 27, 2006  
Blogger Rob said...

Take away the tax and you still need to replenish the U.S. Treasury with something.

However, if you take away the tax, do you really believe oil companies would give it all back to the consumer? They would keep some portion of it for themselves which would further drive up their margin.

1:27 AM, April 28, 2006  
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