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Thread: The idea of a tax on oil profits is moronic

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    Lightbulb The idea of a tax on oil profits is moronic

    I was watching The Daily Show a while back (actually, when I was supposed to be cramming for my history exam), when I caught John Stewart making a complete fucking fool of himself. Worst of all, the Daily Show audience enthusiastically applauded his every misstep.

    Essentially, Stewart (who to his credit, had an emergency replacement guest in the Wall Street Jounal's OK-ish-but-with-horrible-teeth correspondant instead of, as Tivo predicted, the excellent Thomas Friedman) kept trying to get the oil/economy expert to admit that it was outrageous how oil companies were making so much money off of high oil prices. At one point he said something like "Well yes, I know that the prices are high and so they have to sell them at that price, but doesn't it seem like they're taking too much advantage of the situation? Aren't they screwing us over? Shouldn't they take at least a bit of a cut and pass the savings onto us?"

    Holy shit, is there anyone out there that does not see the collosal ignorance involved in that statement?

    Just in case, lemme explain as I wanted to do to Stewart: oil companies sell a commodity they pull out of the ground. As it is a commodity, they have to sell it at the price dictated by the market, over which they have little control (much like the stock market). Oil companies are not the middle man. They don't get the oil at a high price and then have to turn it over to the consumer. They dig it out of the ground and sell it at whatever price the market dictates. They're essentially famers relying on wheat prices. When oil was at ten dollars a barrel, they lost enormous sums of money. Now that oil is at seventy dollars a barrel, they not only make money, but make it economically feasibly to explore oil in areas that were previously economically inefficient to mine. A tax on their profits would cut back on exploration and innovation and, in the future, only serve to raise oil prices.

    Basically, oil companies have already purchased stock in oil. They have to sell it at the price the stock market dictates. Let's say they bought it at twenty. If the market's at twenty-two, they make a two dollar profit. It's a profit, but it's not great. If the market goes to thirty, they make a ten dollar profit. Again, good, but not outrageous. Now that it's at seventy-five, however, they're making a fifty-five dollar profit, and people are saying "Wait, why are YOU making so much money?". They don't really have a choice. And they're using their money to find more oil to sell it to you. Pointing out their large profits as an example of industry greed is just taking advantage of public ignorance. I fucking hate it, you stupid fucks. That policitians (sadly, largely Democrats) are proposing a "windfall tax" to punish oil companies for making large amounts of money is just pandering to public ignorance at the cost of an efficient economy. Makes me sick.

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    Wow, I never thought of it that way. Up until now, I thought that, simply, oil companies were price gouging and taking advantage. Thanks for making me a bit less ignorant.
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    Alright, disclaimer necessary, Claibe--your family has a stake in the oil business.

    That said, you do have several excellent points. I fucking hate paying $3 a gallon, but everywhere else in the world has been paying that much for decades now.

    Still ticks me off that I'm practically paying post-Katrina prices for gas.
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    I think I have a question on your point.

    I trust you're familiar with the invisible hand concept - now, if companies can afford to sell for less, why would they be selling at more than the required price to, say, both make a profit and be able to expand at a healthy rate? Ideally, wouldn't they be forced at a price that would allow this to happen, and no more? And I can't see the 20$ extraction price versus the 55$ profit fitting into that market of necessity.

    What would be the reason for such a great discrepancy, exactly? It can't all go to finding new oil for the market of such a commodity.
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    OPEC is one of the reasons for the rising prices.


    As well the Oil companies are not completely innocent.
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    Sarah - You know me well enough to know that I don't allow personal biases to color my opinion. I've always been a proponent of the free market system (with a powerful government body charged with guarding it from monopoly/oligopoly) and had a strong antipathy towards ignorace.

    The main reason that gas prices just shot up by about twenty cents or so is due to a recently-enacted law that forced gas to be mixed with a certain percentage of ethanol, a substance that can't be easily stored or transported, creating shortages in some areas. Also, many gas stations, especially in the Northeast, haven't yet set up the proper infrastructure to handle it. In a few months, however, the cost of the ethanol-additive will likely decline as the country develops the proper infrastructure to deal with it and ethanol refineries gear up production.

    Quote Originally Posted by T-6005
    I trust you're familiar with the invisible hand concept - now, if companies can afford to sell for less, why would they be selling at more than the required price to, say, both make a profit and be able to expand at a healthy rate? Ideally, wouldn't they be forced at a price that would allow this to happen, and no more?
    Companies can certainly afford to sell for less, but they don't have the ability. The price of their product is dictated by the market. Again, if you own a piece of stock trading at $75, you can't decide that you want to sell it for $70, you have to sell it for 75. The market, not the individual, dictates the price. Many consumer industries sell a patented product whose price they can choose based upon its cost to manufacture and estimated demand. Oil companies all sell a similar product, so the price is determined by the aggregate global supply and demand. Right now, it's increasingly expensive to find supply - you have to sink billions of dollars into each new well you drill. Even ExxonMobil, the largest company in the world right now, often partner's up with other other companies when drilling wells in order to defray costs. Simultaneously, India, China and various other third-world countries are rapidly modernizing, increasing global demand. Prices are being effected at a global level by forces that are beyond anyone's control and are only going to grow stronger in the coming years.
    “It is a strange paradox that today’s central banks are generally staffed by economists, who by and large profess a belief in a theory which says that their jobs are, at the best, unnecessary, and more likely wealth-destroying. Needless to say, this is not a point widely discussed among respectable economists. Nevertheless, it is an issue worth pondering.”

    George Cooper, The Origin of Economic Crises

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    Mota, how is it that gas costs more for other countries than it does for us? Also, are you saying that OPEC doesn't engage in price fixing?

    I know you're more level headed than to be suckered into being a mouthpiece for Big Oil. But disclaiming one's personal involvement is generally the way things go, y'know?
    Last edited by the_GoDdEsS; 05-16-2008 at 10:36 AM. Reason: mod management
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    I thought Mota was a nigger, not a raghead?
    Last edited by the_GoDdEsS; 05-16-2008 at 10:35 AM. Reason: mod management

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    Quote Originally Posted by Little_Miss_1565
    Mota, how is it that gas costs more for other countries than it does for us? Also, are you saying that OPEC doesn't engage in price fixing?
    A variety of reasons. For one, the US still produces some of its own oil, and domestic production helps keep the price down (otherwise we're shipping oil into the country in tankers, which is fairly expensive). In addition to having to import most of their oil, many European countries also have very high taxes on the product (along with high taxes on everything).

    And of course OPEC engages in price fixing, but they aren't the culprit this time. There are several long-term factors coming into play here, along with many short-term ones, mainly that Iraq, the country with the world's second-largest oil reserves, has stopped being a significant contributor to the global market, and Iran ain't looking too good either. We're talking about aggregate supply and demand for a global resource, filtered through specific production issues shaped by domestic politics. There are several factors at play here, and no easy villian. The fact is, OPEC's policies towards setting oil prices have not changed significantly lately.
    Last edited by Mota Boy; 05-15-2008 at 03:08 AM.
    “It is a strange paradox that today’s central banks are generally staffed by economists, who by and large profess a belief in a theory which says that their jobs are, at the best, unnecessary, and more likely wealth-destroying. Needless to say, this is not a point widely discussed among respectable economists. Nevertheless, it is an issue worth pondering.”

    George Cooper, The Origin of Economic Crises

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    This is largely coming from assumption. but I'm looking forward to the day when oil runs dry. All this controversy is as annoying as apple-users.

    Also many European nations have their own oil. Denmark does for example, as does Norway. Yet we have the highest prices, because we have a huge sales-tax and then taxes added upon oil. It may also have something to do with Kyoto, I don't know because I don't consume much gas.
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