Obama wants to tax oil companies' windfall profits

[TinmanMS6]

With rising gas prices looming as a key issue in the 2008 presidential campaign, Barack Obama on Monday visited this battleground state to outline an ambitious energy plan. The expected Democratic nominee says he wants to tax oil companies' windfall profits and use some of the money to help consumers pay for gas.

Obama's campaign also released a controversial ad this weekend that accused presumptive Republican nominee John McCain of being in the pocket of big oil. However, a variety of media outlets, including CNN, pointed out that the oil and gas industries have contributed to Obama's campaign as well.

Obama's visit to Michigan comes on the eve of McCain's visit here, where he will hold an event on Tuesday at DTE Energy's Fermi 2 nuclear power plant.

What this means to you: Rising gas prices dominate center stage as the presidential candidates continue their sparring. But don't expect relief anytime soon.

[TinmanMS6]

I was also reading an article in the New York Times last night saying that he's planning to offer a $7000 tax incentive to buyers of hybrid cars. I'm not sure why we need an incentive for hybrids, with gas costing what it does, but why only hybrids? Why don't we have a sliding incentive scale based on fuel economy, not what technology is underhood?

Oh, also from that article:

Mr. Obama said that through a mixture of investment, discipline and more restrained consumption it would be possible to completely eliminate oil imports from the Middle East and Venezuela within 10 years.

LOL! Probably not.

[STLBLKMSP]

It took Brazil 30 years to become foreign oil dependant.

[arkenzo]

I was also reading an article in the New York Times last night saying that he's planning to offer a $7000 tax incentive to buyers of hybrid cars.

That is bullshit, don't these cars have lithium batteries as their second source of power? Heat normally kills batteries over the time, when the Hybrid cars battery dies, is it going to be recycled? How much waste do you think a lithium battery has? Seems more toxic than air pollution.

[happy and angry]

That is bullshit, don't these cars have lithium batteries as their second source of power? Heat normally kills batteries over the time, when the Hybrid cars battery dies, is it going to be recycled?Yes.

How much waste do you think a lithium battery has?None, if you recycle it.
Seems more toxic than air pollution.Not if you recycle it.

I'm not sure I'm too worried about electrics. Some scientists recently found a way to make solar panels 40 times more efficient, and someone else recently found a way to use solar energy and platinum/cobalt to perform more efficient electrolysis. This means we (theoretically) have an easy to produce source of hydrogen gas, and more efficient means of generating electricity from UV radiation. These are both good developments.

[arkenzo]

Yes.
None, if you recycle it.Not if you recycle it.


Battery recycling methods requires a high amount of energy, It takes six to ten times the amount of energy to reclaim metals from recycled batteries than it would through other means, doesn't seem so environmentally friendly. Recycling lithium batteries is not an easy task, it does more harm than good in the long run. (protest)(protest)

[BlackCherry06]

Here's the deal. EM and the like are getting filthy rich off the American public. They can give some back.

The challenge will be to make sure all the money is appropriated correctly and not wasted on government foolishness.

[TinmanMS6]

Here's the deal. EM and the like are getting filthy rich off the American public. They can give some back.

The challenge will be to make sure all the money is appropriated correctly and not wasted on government foolishness.

Hopefully it'd go to pay for those $7k tax breaks. I don't think the oil companies are just going to eat a cut in profits. They're just going to increase the price of gas so they get their money regardless. We're all going to suffer for it. This'll just become a de facto gas tax increase.

[KzA]

Well, if EM doesnt make gas prices a bit more appealing, they are going to see demand dropped sharper than it already is. I am not at all worried about lithium ion technology, all we need is the government to throw a small portion of its giant wallet at research and development and Li will advance very quickly.

We also arent Brazil...The US will be using oil for a longgggggggggggggg long time. However, if we could greatly cut down our oil usage, thoroughly increase the use of renewable energy, and harness some of the oil that can be found inside our country then we can become foreign oil independant. Its just going to take a politician that is going to throw a large amount of money at the issue very very quickly, and I think we all know who that is.

[Rogue]

Here's the deal. EM and the like are getting filthy rich off the American public. They can give some back.

The challenge will be to make sure all the money is appropriated correctly and not wasted on government foolishness.why should a private company give money back it has earned?

Their profit margin is 4%. The government makes more per gallon than the oil company does.

[dmitrik4]

A) by the same token, why should they continue to get tax breaks?

B) the market for oil is distorted, both b/c of the relative lack of competition and the relative inelasticity of the demand for oil. assuming the self-reported 4% profit margin is true (and what i'v e read puts it closer to 10%)...so? there are plenty of industries with profit margins on both sides of that number.

just as they don't have any obligation other than to make as much money as possible, they don't have any entitlement to the special treatment they've received so far.

[dominoy2k1]

listened to this guy on george noory show. pretty interesting. how does taxing oil co help us? wont they just raise it more to make up for lost profits?

click (http://www.coasttocoastam.com/shows/2007/12/04.html)
click2 (http://www.energyvictory.net/images/Summary_of_the_Open_Fuel_Standard_Act.PDF) pdf

[mazdaspeedwerx]

what consumers will be getting this money to pay for gas. about a month ago I was telling my g/f that very soon the gov will start handing out gas vouchers to everyone on government assistance. if that happens it is time to move to canada.

[Knox Joe]

A) by the same token, why should they continue to get tax breaks?

B) the market for oil is distorted, both b/c of the relative lack of competition and the relative inelasticity of the demand for oil. assuming the self-reported 4% profit margin is true (and what i'v e read puts it closer to 10%)...so? there are plenty of industries with profit margins on both sides of that number.

just as they don't have any obligation other than to make as much money as possible, they don't have any entitlement to the special treatment they've received so far.



Well if we do take more money for them, and remove their tax breaks all they will do is cut how much they ship to the U.S. and we will have shortages again much like the seventies. It's their product, if we are not wiling to pay what they want, they will sell it somewhere else.

But hey, you libs can dig your own grave, I haven't paid for my own gas in 3 yrs.

[dmitrik4]

maybe we should exempt them from taxes altogether since they're doing us such a huge favor.

the scenario you point out is exactly the problem, Joe. the market is an effectively sealed oligopoly; a few participants dictate everything b/c there is no fear of competition. it's--dare i say?--unamerican.

i walk to work. gas could be $6/gal and it wouldn't significantly affect my behavior. but the fact that oil companies are able to basically extort the people and the government by virtue of their control of the market bothers me. the only way we can ensure competition in the market for transportation energy is to figure out other ways to generate energy to transport goods and people.

[KzA]

nice wording dude...I would have just said it is bullshit

[Rogue]

B) the market for oil is distorted, both b/c of the relative lack of competition and the relative inelasticity of the demand for oil. assuming the self-reported 4% profit margin is true (and what i've read puts it closer to 10%)...so? So, what if it's 10%? I think people just see the $14B and think that's too much money for a corporation to be making. Let's say it was only $100K, but still at 4-10%, would people still be wanting to take their profits?


there are plenty of industries with profit margins on both sides of that number.
So, should the government take their windfall profits also? Seems like you're suggesting the government put a invisible ceiling on how much a company makes. Anything past that ceiling, and the government takes it.


just as they don't have any obligation other than to make as much money as possible, they don't have any entitlement to the special treatment they've received so far.
Who do you think should receive such "entitlements?" Without oil companies supplying fuel to run tractors, semi trucks, trains, etc, how do you think any of the products would end up on shelves? How do you think a majority people would get to work? Don't you think something providing so much for our economy should get a break?



But hey, you libs can dig your own grave, I haven't paid for my own gas in 3 yrs.How do you not pay for fuel? Someone has to be paying for it.


i walk to work. gas could be $6/gal and it wouldn't significantly affect my behavior. That's where you're wrong. As fuel prices go up, the cost of consumer goods will go up because their being transported by package trucks (gas), semi-trucks (diesel) and trains (diesel). It costs more for them to get stuff shipped in, so that cost gets past onto the consumer.... you and me.


but the fact that oil companies are able to basically extort the people and the government by virtue of their control of the market bothers me. the only way we can ensure competition in the market for transportation energy is to figure out other ways to generate energy to transport goods and people.I totally agree with that, but what do we do in the mean time?

We need a better battery that doesn't cause so much pollution in the manufacturing.

Solar is now more efficient, but what's the cost to the normal home owner. I'd love to put some solar panels on my roof, but how long do I have to have them before I actually see a savings...

I'd love to see a car company get their head out of their ass and make a turbo-diesel-hybrid. I could only imagine the crazy gas-mileage you'd get out of that.

Cost. That seems to be the biggest factor. Gas engines are cheap, hybrid is getting cheaper, but that doesn't solve the dependency issue. What about fuel cells or hydrogen. Full electric has it's issues. Pollution is created where the energy is created: power plants. Recharging takes hours (8 hrs for a full recharge on the Tesla). Batteries are toxic. Deaf people can't hear them (seriously... they're complaining the Prius is too quiet).

[Knox Joe]

How do you not pay for fuel? Someone has to be paying for it.



I have a really awesome job.

I work for a big evil corporation! Much like big oil! Capitalism rules!

[Roywhitep5]

I have a really awesome job.

I work for a big evil corporation! Much like big oil! Capitalism rules!

i miss my company gas card:(

[Rogue]

I have a really awesome job.

I work for a big evil corporation! Much like big oil! Capitalism rules!so, in a way you are paying for your own gas. You could be paid more if your employer wasn't having to pay for your gas. Just because it's not coming out of your pocket doesn't mean you're not "paying" for it.

[Knox Joe]

so, in a way you are paying for your own gas. You could be paid more if your employer wasn't having to pay for your gas. Just because it's not coming out of your pocket doesn't mean you're not "paying" for it.

Well shit, if you add all that kind of stuff to what I earn, I am pushing 6 figures!!!!


w00t!

I don't figure that into my pay really.


edit: I drive all day for work, delivering product, sales calls, etc. so I mean the gas card comes with it.

[MikeLikesMazda]

i want a company gas card :( lol

[TinmanMS6]

I'd love to see a car company get their head out of their ass and make a turbo-diesel-hybrid. I could only imagine the crazy gas-mileage you'd get out of that.

Yeah, but then you figure in the added cost of a hybrid...and the added cost of a diesel. Then you figure in the added weight of a hybrid system...and the added weight of a turbodiesel. There's definitely a point of diminishing returns.

[Viralphrame]

Bottom line: EM is still a private corporation, so they will do what they need to in order to maintain their already-deflated profit margin. That's the raison d'être of a corporation. To make money. Tax the profits? Raise the prices.

What's an acceptable profit margin to the government for a corporation to avoid a 'windfall tax?' 3%? 2%? I work for a homebuilder, and the ABSOLUTE SMALLEST margin we operate on is 10% for sales to employees. Ten percent! Imagine the margin on non-employee sales. Do we make a 'windfall profit' on every house we sell, now? Come on.

[dmitrik4]

no, b/c you're competing w/ other homebuilders in a relatively open market. if you charge more than people are willing to pay, they'll hire someone else, or buy an already-built house, or rent. or another company will enter the market to compete with you. none of those things are applicable to the oil market.


So, what if it's 10%? I think people just see the $14B and think that's too much money for a corporation to be making. Let's say it was only $100K, but still at 4-10%, would people still be wanting to take their profits?

So, should the government take their windfall profits also? Seems like you're suggesting the government put a invisible ceiling on how much a company makes. Anything past that ceiling, and the government takes it.

my whole point was that the profit margin, whether it's 4% or 10%, is irrelevant. you're the one who brought up "4%" as a counterargument. i pointed out that A) that figure is likely inaccurate, and B) it's irrelevant anyway.

and my non-opposition to the idea isn't the profits being made; they have a right to make whatever profits the market will bear. the problem is, as i previously argued, that the market isn't competitive; it's distorted. once players in a market manipulate it in a way that they're able to effectively charge whatever price they want, the freedom (and, one could argue, the obligation) to earn as much as possible goes away. so it's not about the profit figure, but about how those profits are achieved.

by your logic, if they paid no taxes at all, prices would plummet. do you really think that's what would happen, or would prices stay about the same? my bet is the latter.



Who do you think should receive such "entitlements?" Without oil companies supplying fuel to run tractors, semi trucks, trains, etc, how do you think any of the products would end up on shelves? How do you think a majority people would get to work? Don't you think something providing so much for our economy should get a break?

there's the rub. b/c our economy is so dependent on the product, the supplier gets to charge whatever it wants. one could argue that b/c it's no longer a bargain freely entered into between buyer and seller, and the seller has an inordinate amount of power over the terms of the transaction, the seller has an obligation to treat the buyer fairly (which is indeed the case in most such situations).

as far as "entitlements"; you're assuming i think any business should get special treatment. and in fact, i do...those unique businesses that are particularly beneficial to the public good (all business is beneficial; some more so than others), and that would otherwise struggle to survive. EM fits the first, but not the second.



That's where you're wrong. As fuel prices go up, the cost of consumer goods will go up because their being transported by package trucks (gas), semi-trucks (diesel) and trains (diesel). It costs more for them to get stuff shipped in, so that cost gets past onto the consumer.... you and me.

i understand how that works. i stand by my statement, which is based on my personal situation.

[TinmanMS6]

and my non-opposition to the idea isn't the profits being made; they have a right to make whatever profits the market will bear. the problem is, as i previously argued, that the market isn't competitive; it's distorted. once players in a market manipulate it in a way that they're able to effectively charge whatever price they want, the freedom (and, one could argue, the obligation) to earn as much as possible goes away. so it's not about the profit figure, but about how those profits are achieved.

I believe you're correct that prices would change very little if we stopped taxing fuel, as they'd just enjoy higher profits while slightly lowering prices if at all, but I can promise you that prices will increase if you tax them more. All you're going to do is change the percentages. If they're making 10% now, they're just going to try to make similar profits at 5% with a higher price. There's no way increasing any sort of tax on fuel companies is a win for the American consumer.

[Knox Joe]

no, b/c you're competing w/ other homebuilders in a relatively open market. if you charge more than people are willing to pay, they'll hire someone else, or buy an already-built house, or rent. or another company will enter the market to compete with you. none of those things are applicable to the oil market.



my whole point was that the profit margin, whether it's 4% or 10%, is irrelevant. you're the one who brought up "4%" as a counterargument. i pointed out that A) that figure is likely inaccurate, and B) it's irrelevant anyway.

and my non-opposition to the idea isn't the profits being made; they have a right to make whatever profits the market will bear. the problem is, as i previously argued, that the market isn't competitive; it's distorted. once players in a market manipulate it in a way that they're able to effectively charge whatever price they want, the freedom (and, one could argue, the obligation) to earn as much as possible goes away. so it's not about the profit figure, but about how those profits are achieved.

by your logic, if they paid no taxes at all, prices would plummet. do you really think that's what would happen, or would prices stay about the same? my bet is the latter.



there's the rub. b/c our economy is so dependent on the product, the supplier gets to charge whatever it wants. one could argue that b/c it's no longer a bargain freely entered into between buyer and seller, and the seller has an inordinate amount of power over the terms of the transaction, the seller has an obligation to treat the buyer fairly (which is indeed the case in most such situations).

as far as "entitlements"; you're assuming i think any business should get special treatment. and in fact, i do...those unique businesses that are particularly beneficial to the public good (all business is beneficial; some more so than others), and that would otherwise struggle to survive. EM fits the first, but not the second.



i understand how that works. i stand by my statement, which is based on my personal situation.


How much does it cost EM to get one gallon of gas out of the ground and to the pumps?

Go figure that one out, then tell me they are making too much money.

It takes money to make money.

[Donas64]

I don't think that the oil companies should have to give anyone their profits. They work to deliver the product. If anyone should give the profits back, its the govt that taxes that product.

I also don't think the oil companies should get those huge tax breaks at a time when they are so profitable. Granted tax break for companies stimulate growth of business, but I think the oil companies would manage to get by.

Also, there needs to be an end or drastic cut back to oil speculation.

I don't believe in re-distribution of wealth, but I do believe in energy independence and a level playing field.

[dmitrik4]

I also don't think the oil companies should get those huge tax breaks at a time when they are so profitable. Granted tax break for companies stimulate growth of business, but I think the oil companies would manage to get by.

Also, there needs to be an end or drastic cut back to oil speculation.

I don't believe in re-distribution of wealth, but I do believe in energy independence and a level playing field.

+1.


How much does it cost EM to get one gallon of gas out of the ground and to the pumps?

Go figure that one out, then tell me they are making too much money.

It takes money to make money.

dude. re-read the conversation.

A) "profit" is what's left over AFTER the oil is out of the ground and sold. the cost of doing business is irrelevant to this conversation, b/c this conversation is focused on profits, which (again) are what's left over after expenses.

B) it's not about "making too much money"; it's about how the money is made. the amount is irrelevant.

a "windfall tax" might not be the answer, but as i first stated, they certainly don't need to be subsidized. that money could be more productively used somewhere else...like developing alternatives to oil.

[Knox Joe]

+1.



dude. re-read the conversation.

A) "profit" is what's left over AFTER the oil is out of the ground and sold. the cost of doing business is irrelevant to this conversation, b/c this conversation is focused on profits, which (again) are what's left over after expenses.

B) it's not about "making too much money"; it's about how the money is made. the amount is irrelevant.

a "windfall tax" might not be the answer, but as i first stated, they certainly don't need to be subsidized. that money could be more productively used somewhere else...like developing alternatives to oil.

Those profits are paid in dividend checks to investors, shareholders, and employees.

Do you know exactly how the profits are distributed?

Do you know how much of their profit is re-invested into the company?


See I know a guy who is an engineer for oil rigs, and I kind of know how the business works. When you spend billions of dollars to acquire a product it takes billions of dollars in profit to keep the company going. They invest millions upon millions in exploration, and find dry holes, essentially wasting that money to find us more oil. These companies reinvest their profits into this kind of stuff, and if you take that away, they still have to come up with the money to carry on with business, so prices will go up.

I don't think you realize, that these companies and their shareholders reinvest their profits back into the company. My company does the same thing. We reinvest a lot of our profits, more than half.

[dmitrik4]

When you spend billions of dollars to acquire a product it takes billions of dollars in revenue to keep the company going. They invest millions upon millions in exploration, and find dry holes, essentially wasting that money to find more oil to sell. These companies reinvest their profits into this kind of stuff, and if you take that away, they still have to come up with the money to carry on with business, so prices will go up.

I don't think you realize, that these companies and their shareholders reinvest their profits back into the company. My company does the same thing. We reinvest a lot of our profits, more than half.

fixed for you. ;) they're not spending that money to "find us oil" out of the goodness of their hearts. they are in no way looking out for us. they're spending millions and millions of dollars on exploration b/c that's how they obtain product; b/c that's their business. same reason you and i show up to work every day...we make money doing it. if i wasn't getting paid, i wouldn't be here. if EM wasn't making money selling oil, they wouldn't be looking for more.

and if "profits" are being used to fund business operations, some accountants would argue that they're not profits, and shouldn't be reported as such.

but you haven't addressed the main point, which is the structure of the market.

[Knox Joe]

Basically we will pay whatever it takes to keep them at their 9.5% profit margin. Otherwise they will just sell it elsewhere.

So bottom line is, we're screwed unless we find a new resource.

[TinmanMS6]

but you haven't addressed the main point, which is the structure of the market.

What would you propose we do about the structure of the market? Nobody seems to have any ideas there, and I really doubt that there's much to be done.

[dmitrik4]

So bottom line is, we're screwed unless we find a new resource.

(mswerd)

in the meantime, the less we can use, the better. so check those tire pressures. ;)

[Donas64]

Short Term: Drill here to reduce dependence or at least influence world markets so they know we mean business. Expand Nuclear.

Long Term:

Continue to develop Hybrid & Electric and Hydrogen vehicles, Geothermal, Hydroelectric, Solar and Wind power and slowly wean off fossil fuels.

[Rogue]

Short Term: Drill here to reduce dependence or at least influence world markets so they know we mean business. Expand Nuclear.

Long Term:

Continue to develop Hybrid & Electric and Hydrogen vehicles, Geothermal, Hydroelectric, Solar and Wind power and slowly wean off fossil fuels.drilling locally won't help if the refineries are operating at full capacity already. We need more refineries...

[Donas64]

drilling locally won't help if the refineries are operating at full capacity already. We need more refineries...

you're quite right. I forgot about that aspect.

[Knox Joe]

What would you propose we do about the structure of the market? Nobody seems to have any ideas there, and I really doubt that there's much to be done.

eggs zach aree

[Rogue]

and my non-opposition to the idea isn't the profits being made; they have a right to make whatever profits the market will bear. the problem is, as i previously argued, that the market isn't competitive; it's distorted. once players in a market manipulate it in a way that they're able to effectively charge whatever price they want, the freedom (and, one could argue, the obligation) to earn as much as possible goes away. so it's not about the profit figure, but about how those profits are achieved.

I think they've found their limit: $4/gal. When it hit $4 people finally made a change. There's an article about it Automobile Magazine (either July or August). People are finally changing their driving habits and trading in their SUVs for civics. The local gas stations are starting to lower their prices, premium is almost down to $4. I've changed to the point i'm getting 28mpg out of my turboed P5. Joyce Ann gets almost 30mpg in her MSP.

Maybe if they offered "tax breaks" to oil companies that put their revenue into alternative fuel research.