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The Price and Profit Scarewagon
Posted by: Jon Henke on Monday, April 24, 2006

It's disappointing to see Republicans jumping on the Price and Profit scare-wagon...
Congress should consider a tax on excessive oil company profits, two senators said Sunday, as gasoline prices in some cities have risen above $3 a gallon.

Sen. Carl Levin, D-Mich., said on CNN's Late Edition that President Bush should call for a windfall profits tax on the oil companies' "extreme, obscene profits." Sen. Arlen Specter, R-Pa., appearing on the same program, said a windfall profits tax is "something worth considering," as well as legislation targeting consolidation of oil companies.
Senator Levin objects to "extreme, obscene profits", but has yet to...

  • ...describe the proper, moral profit margin.

  • ...object to the governments "extreme, obscene profits" from oil prices — the government, by the way, has made far more than the oil companies themselves.

  • ...call for windfall profits taxes on the pharmaceutical, banking, semiconductor, financial, software or telecommunications industries...all of whom have greater profit margins [pdf] than the oil/gas industry.

In fact, Exxon's recent $10 billion quarterly profit — — actually constituted a profit margin of only 10%...hardly an outlier. And it's gross profit margin in 2004 placed it "No. 127" on the Fortune 500. That would leave 126 companies for Senators Levin and Specter to pillage before they get to Exxon.

But no. No, instead, we get anti-capitalist demagoguery. As a Richmond Times-Dispatch editorial recently noted...
Self-styled progressives hate the oil companies for jacking up gasoline prices — i.e., "price gouging."

They hate Wal-Mart for, among other things, setting prices too low and undercutting local competitors.

And they're mighty suspicious when companies charge the same price, which is evidence of "collusion."
As John Hawkins writes today, high gas prices in an election year create a perfect storm for pandering, bad economics and busy-body politicians.


UPDATE: Cripes, it gets worse. Hastert and Frist have co-signed a letter to the President asking him to "take every available step to ensure that all Federal laws protecting American consumers from price-fixing, collusion, gouging and other anti-competitive practices are vigorously enforced."

Hey, since we're willingly paying $3/gallon for gas right now, does that mean the oil industry had previously colluded to under-price gasoline in the 1990s? Why weren't the oil companies just jacking up the gas prices circa 1995 when I was paying less than $1/gallon? And why were these politicians no proposing generous tax rebates to the oil industry for their generosity? I mean, since politicians seem to believe they can just set whatever price they like regardless of supply and demand...

MORE: Christopher Taylor at Word around the Net gives a lengthy explanation of oil economics, and why the real bottleneck supply problem has been created by (ta-da!) government itself. Very useful read.
 
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Previous Comments to this Post 

Comments
Sen. Specter is a Republican? News to me...
 
Written By: shark
URL: http://
Yeah, when did he switch sides?
 
Written By: Robb Allen (Sharp as a Marble)
URL: http://sharpmarbles.stufftoread.com
Senator Levin objects to "extreme, obscene profits.....he said while looking over his portfolio of the high and generous Senate package of salaries, healthcare plan, retirement plan, and various other perks that he gets.

Cretin.

 
Written By: shark
URL: http://
More proof that Big Brother Bush and the liberals have taken control of the GOP.
Remember the Bush family has been anti-capitalist for 40 years. It was the first Pres Bush who described laisser faire capitalism as "Voodoo Economics" 30 years ago. They are against free enterprise no matter what lies they tell. They support Republicans who are also against free enterprise. This is just the lates proof of the liberal control of the GOP.
The best proof is they have expanded the Federal Govt more than 50% in 5 years!
 
Written By: JommacDougal
URL: http://
GWB is a liberal!! Wow the things you learn. ;)
 
Written By: capt joe
URL: http://
"Windfall Profits Tax" - Just another money grab...er, revenue enhancement.
 
Written By: D
URL: http://
Anyways, Jon, that Hastert/Frist letter is much verbiage and puffery, signifying nothing. Basically, it exhorts the President to make sure current anti-trust laws are being enforced. Like they aren’t already on such a high-profile, politically sensitive industry.
 
Written By: D
URL: http://
Senator Levin objects to "extreme, obscene profits", but has yet to...


...describe the proper, moral profit margin.
Whatever Congress says it is. That’s how government works, Jon. Why is this such a mystery? If a majority of Congress passes a law, and the President signs it, then that becomes the proper moral profit margin.

We have all sorts of laws that restrict ones ability to make a profit in the marketplace. (The anti-trust laws are a great example.) You imply that the proposed law here is somehow different. But how is it different?

And btw - how can a profit margin be moral? Seems to me Levin is simply proposing a law the effect of which would be to redistribute wealth differently than it is being distributed now. But government does that all the time too. In the last 5 years, government has moving away from a redistributivist model that favors the lower end of the economic spectrum to one that favors the higher end. It’s funny how consevatives (and yes, Jon, you are a conservative) howl in protest when the equlibrium swings back.

I don’t know if Levin is doing a good thing or a bad thing. But there is nothing moral or immoral about what he is doing. As long as the democratic process is followed, and constitutional rights aren’t infringed, why is this news?
 
Written By: mkultra
URL: http://
What’s the beef here? Just more "Woe is us the GOP has failed us!" The price of gas rises, Congress investigates, it’s like clockwork. It’s an election year, what ELSE are they going to do?
As to windfall profits taxes, first Reagan had them removed, I think the Party of Reagan will remember them. I believe the Blogosphere will will remind them. I think that oil interests will lobby them and I think that the inertia of Congress will doom them, again it’s an election year, politicians want to be seen "DOING SOMETHING about the high price of gas."

Just as we all love Mom, Apple Pie, and the US Flag, so we all abominate excessive oil profits and price-gauging...
 
Written By: Joe
URL: http://
we all abominate excessive oil profits and price-gauging...
except when there are shares of the companies in question in our investment portfolios (see the top cos. in the S&P 500 and you’ll know what I mean). >8-D>
 
Written By: D
URL: http://
D I was being sarcastic or ironic...but it heits me you know that; so, I’ll just follow with:
except when there are shares of the companies in question in our investment portfolios
Which makes YOU a Running-Dog Lackey of Fascistic, Monopoly Finance Capital, A Capitalist Roader, A Toadie to Da Man, and an oppressor of the Gays, Lesbians, Bi-Sexuals, the Transgendered, Women, the Poor and People of Colour!

I myself am hoping that MY investment managers get me out of the oil futures market before the big drop...
 
Written By: Joe
URL: http://
Whatever Congress says it is.
Uh, no. It has the corner on telling what the "legal" profit margin is, depending on how they’d write the law. But legal often has nothing to to with moral, as you, a lawyer, should know.
 
Written By: McQ
URL: http://www.qando.net/
I’m trying to understand how the government taking ’my’ money from the Oil Companies after the Oil Companies have taken it from me is any real help to ME.....

Sorta like Robin Hood robbing from the Rich, who took it from the poor, and keeping it for himself, ain’t it?

 
Written By: looker
URL: http://
No, no, NO Looker the guv’mint will HE’PPING you...that increased Federal Revenue, and it’s associated pass-thru to you in the form of yet higher prices, and reduced profitability (further restricting investment and yielding HIGHER prices at the pump) will go for many useful projects that benefit you, if YOU happen to be a Congressperson who’se moving rail lines or building bridges in Alaska.
 
Written By: Joe
URL: http://
Forget a windfall profit tax.

But could we at least retroactively remove the billions in tax credits to the oil industry that were enacted last year?
 
Written By: davebo
URL: http://
Davebo, do we WANT to? I’m against Corporate Welfare, BUT if you’re going to remove tax credits, you "ding" profits and dinged profits do not lead to more production and exploration....
 
Written By: Joe
URL: http://
Joe,

Trust me. At $70.00 a barrel we don’t need to encourage exploration and production. Look at day rates on contract rigs in the Gulf now versus two years ago. Look at the drill ships currently under construction in S. Korea and elsewhere.

Utilization is higher than it’s been in years and fleets are expanding. It’s one of the most anti capitalism concepts I’ve ever seen. The market is taking care of E&P just as everyone always said it will. We don’t need any federally sponsored incentives.
 
Written By: davebo
URL: http://
Whenever a liberal liar named Bush says, "I am a conservative" remember that it was a liberal President Bush who promised us "read my lips!...". The Bush family are born liberal liars who are against individual freedom and for government control of our lives.They know better than we ;for we are not a bright as they. And the government grows and grows.
The party of Ronnie is now the anti Ronnie Party!
 
Written By: Rodney A Stanton
URL: http://
Thank you Rodney and this helps us determine the proper oil and gas tax policy HOW?
 
Written By: Joe
URL: http://
MSNBC had a piece last week (I think) that stated that 1/3 of every dollar spent on gasoline now goes to oil speculators, not the oil companies, OPEC or retail outlets.
 
Written By: Neo
URL: http://
Uh, no. It has the corner on telling what the "legal" profit margin is, depending on how they’d write the law. But legal often has nothing to to with moral, as you, a lawyer, should know.
Are you prepared to say that any limit Congress places on a profit margin is necessarily immoral? Really? Why would it be immoral?

Again, the burden is not the Senator to explain what profit margin is "moral." The burden is on the opponents to explain why any limit placed on the margin would be immoral. Jon gets it exactly backward. After all, a law duly passed by democratically elected representatives is presumptively moral. Right? The presumption can be overcome, of course. But I doubt you or Jon or anyone could make an argument that a certain number is immoral, in spite of what Congress does.



 
Written By: mkultra
URL: http://
If they ship whatever they extract (in the US territories) to China I’m not exactly going to be thrilled that we subsidized the exploration/extraction though.
One problem is it all seems to go into a common pool. There doesn’t seem to be any particular benefit to ’me’ for them to find oil "locally" if the business then dictates it be shipped to China to satisfy their purchase of x million barrels of oil from the great global supply pool.
The guys keep jacking the price up by being afraid of everything "Eeeek Iran!", "EEEEEK, Nigeria!", "EEEEEEEK, Talk of US Government Windfall Profits Tax" - "RAISE THE PRICE!!!!! WE’RE NERVOUS!!!!!".

And Rodney, yes, I would have been so much happier instead with a President who, as a Senator, manages to vote on almost nothing, has managed to accomplish almost nothing (except help suck 14 billion plus dollars out of the US economy to subsidize, LITERALLY, a hole in the ground in Boston Mass), and spent his earlier life telling us our veterans were scum while hanging around with a drunk driving murderer/Senator from the same state. Gimme a break. You had another choice I missed maybe?
 
Written By: looker
URL: http://
"Whatever Congress says it is. That’s how government works, Jon."

(laff, laff, laff)

I was about to link this post, and then I read that. It is absolutely spot-on: it’s perfect for your social metaphysics, Henke, and you richly deserve it.
 
Written By: Biilly Beck
URL: http://www.two—four.net/weblog.php
After all, a law duly passed by democratically elected representatives is presumptively moral. Right?
I hope this is sarcastic... you do recall that Slavery was legal in the United States up until December 1865, right?
 
Written By: looker
URL: http://
Mkultra, you’re a j*ck*ss, as usual.

 
Written By: Unknown
URL: http://
I was just over at LGF and he made a reference in one of his posts to
G. Orwell.
I think the "Ignorance is Strength" proclaiming Bush has turned the GOP into the AmSoc Party. If you do not know AmSoc read 1984.

Looker - - You are right. We had no choice in 04. I did vote for Bush! JFK would have been the worst President in history! But Bush is awful! To say he is better than JFK is like saying the Chargers are much better than the Raiders. It is a true stament. But both teams are sub mediocre!
 
Written By: Rodney A Stanton
URL: http://
Whatever Congress says it is. That’s how government works, Jon."

(laff, laff, laff)

I was about to link this post, and then I read that. It is absolutely spot-on: it’s perfect for your social metaphysics, Henke, and you richly deserve it.
Billy:

I know they don’t teach civics anymore, but there was a time when people understood our constititutional system - they actually learned about it in school.

Congress has certain enumerated powers under the constitution. When it passes a law, it must act pursuant to one or more of those enumerated powers. When Congress acts outside one of those enumerated powers, it acts unconstitutionally. A party injured by Congress’s action can go into a courthouse and file a lawsuit, either seeking to have the law declared unconstitutional, or at least unconstitutional as applied to him.

Now, the amendments to the constitution also act as a limit on constitutional power. When an act of Congress violates a person’s rights under an amendment to the constitution, the person can go into court, file a lawsuit, and seek to have the action delclared unconstitional. If the person prevails, the act of Congress is effectively void.

Now, these are not the only checks on government. We also have elections. In elections, we choose who we send to Congress. In that way, we participate in the shaping of policy. Because sometimes, our elected representatives pass laws that we don’t think are good policy, even if they are constitutional.

That’s our system.

Now, are our laws based on morality? Well, in one sense, yes. Because, after all, the consensus is that a democratic system is inherently a moral one. After all, why are our soldiers dying in Iraq.

The problem becomes that sometimes our lawmakers make laws we don’t like - from a policy standpoint. In order to demagogue the issue, pundits will claim that such laws are immoral. And they may be, at least in one sense of the word. But in another sense they are not - because, after all, they are the product of a political system of governance that is inherently moral. Again, why are our soldiers dying in Iraq.

Most of the time, it is religious fundamentalists/anti-secularists who invoke the "moral" card. Sometimes it is hard core secular humanists. Most of the time, they complain that certain "social" laws are immoral.

But every once in a while, it is a so-called libertarian. Or neo-lib. Or whatever. And they call laws having to do with the distribution of wealth immoral. They don’t really explain why such a law is immoral. For instance, for some, a tax rate over 30% is immoral. For others, the "moral" number is 20%. For others, any tax is immoral. For some, the estate tax is immoral.

But again, they don’t really have any firm explanation for why such a law is immoral. Instead, they shift the burden to the proponents to explain why the law is moral.

And then we get back to where I began: Because the law was passed by a democratically elected government and is not unconstitutional.

Now, any other system is unworkable. If you disagree, you are basically calling for anarchy. A system in which every man determines which laws are moral and which are not.

And the funniest part is that Henke - the man who says media bias cannot be tested because it is an inherently subjective exercise - claims that there is some objective basis out there for measuring the morality of certain tax rates.

Now, Jon’s point may be the opposite: there is no "moral" amount of profit. But if that’s the case, there is no "moral" amount of tax on that profit.






 
Written By: mkultra
URL: http://
Are you prepared to say that any limit Congress places on a profit margin is necessarily immoral?
Yes it would be immoral. Moral is as moral does, and a limit on profit margins would result in shortages. You know Exxon doesn’t just print the money it spends on exploration, research, and development. But most importantly is that such a scheme would, like any price control, f*ck up the information about supply and demand communicated to buyers and sellers via free prices.

And that’s what "profit control" is: a form of price controls.

yours/
peter.
 
Written By: Peter Jackson
URL: http://www.liberalcapitalist.com
Mk, you are so dense it is beond belief. Jon wasn’t saying that there is a moral profit margin. He was saying that if Senator Levin feels profit margins are "obscene" then he needs to go ahead and define it. Jon didn’t bring the question of morality in to the discussion, Levin did. As Jon points out this has nothing to do with Exxon’s profit margins because they aren’t that high, it is about posturing. He wants Levin to define what kind of profit margin is obscene because then we could see if we wanted to hold all companies to that standard. Levin doesn’t want to do that because his only intention is to attack energy producers, not all the other people who would be harmed by taxing all those who have higher profits.

By the way, Hi Peter!
 
Written By: Lance
URL: http://
Are you prepared to say that any limit Congress places on a profit margin is necessarily immoral?
No ... I’m saying whatever they do has nothing to do with morality.

It would be an exercise in arbitrary "legalism" and another fine example of legislative intrusion.
 
Written By: McQ
URL: http://www.qando.net/
I hope this is sarcastic... you do recall that Slavery was legal in the United States up until December 1865, right?
Actually I don’t believe it is. I think he, and many like him, believe it. But to answer your question, to be consistent he’d have to agree slavery was moral.
 
Written By: McQ
URL: http://www.qando.net/
Wow, Jon. You must be continuously disappointed for quite some time now. How sad.
Try this, and maybe it will make you feel better,
It’s disappointing to see Republicans jumping on the ____________ scare-wagon...
You see, it’s not so bad now, is it? The “Price and Profit” scare wagon is just another political wagon. (There is a “hitching…wagon…star… metaphor in there somewhere, isn’t there?)
Why should this wagon be any different than any other wagon? With the exception that it doesn’t involve sex. (Or does it? There is a pump…drilling…pipeline innuendo joke in there somewhere, isn’t there?)

You and I are roughly the same age. Haven’t you figured out by now that the Republicans are NO BETTER than the Democrats?
No reason to be disappointed now. You should have been disappointed from the get go. Once you accept the FACT that Republicans are slimy, filthy, opportunistic bureaucrats; there is no disappointment. It’s kinda’ like accepting the fact that there is no Santa.
Cripes, it gets worse. Hastert and Frist have co-signed a letter to the President asking him to "take every available step to ensure that all Federal laws protecting American consumers from price-fixing, collusion, gouging and other anti-competitive practices are vigorously enforced."
Heh.
I guess Frist and Hastert feel it necessary to remind the President to follow the rule of law.
You know, ‘cause he sucks at that.
 
Written By: PogueMahone
URL: http://
Sorry Mkultra, my bad. You’re a pompous j*ck*ss.

 
Written By: Unknown
URL: http://
There is an artificial shortage of gasoline due to the lack of refineries. This is perhaps the biggest cause of the high price.

However, this is a nice situation for suppliers. They enjoy it because they get paid more money without having to put out more cash.

The thing that makes me angry about the price of gas, is the way it shoots up instantly at the pump whenever there’s even a quiver of news form the Middle East. That in itself isn’t the problem. If they want the gas that’s in the ground to reflect commodities prices fine. But when the price of oil sharply drops, somehow it takes a month of Sundays before the price of gas drifts down to reflect the change.
 
Written By: jpm100
URL: http://
I was over at fark.com and on one of the message boards about gas prices they were going bananas that it must be the corporations price gouging, blah blah blah.

The average joe believes this sort of thing. Very disheartening.
 
Written By: Harun
URL: http://
The oil companies are as please as punch there’s a bottleneck on supply. It’s created a near shortage issue that automatically creates a gouging situation courtesy of the environmentalists who also happen to smile at the high price of gas.

What I want to know is if the oil companies are doing what everyone probably assumes they are doing to counter the enviromentalists and get more refineries built? I highly suspect not. About the time, shortly after Katrina, congress was hauling oil executives in front of it, we had a bill under consideration that would authorize or make it easier for a new refinery to be built. *Boom* the price of gas dropped quickly (for a change) and the political energy for the bill disappeared and it died.

Oil companies like the artificial shortage and since competition disappeared with the all the mergers permitted in the ’90s to prop up the stock market bubble, there’s not enough competition for anyone to seek to overcome this artifical shortage.
 
Written By: jpm100
URL: http://
Actually I don’t believe it is. I think he, and many like him, believe it. But to answer your question, to be consistent he’d have to agree slavery was moral.


Yep, I noted in his subsequent post that he skipped that observation totally as he merrily went on his way to prove that if a group of legislators, allegedly acting on behalf of the electorate, pass a law, it must inherently be Moral.
How that line of reasoning progresses from point A to point C, necessarily in a straight line, is beyond me.

Democracy really IS 3 sheep and 4 wolves voting about lunch. As long as the wolves are getting enough chow the sheep may be okay. The day the cracker line stops providing the sheep may wish they had a couple more votes.
No ... I’m saying whatever they do has nothing to do with morality.

It would be an exercise in arbitrary "legalism" and another fine example of legislative intrusion.
Exactly, something being a law, passed by a representative body, doesn’t make it inherently MORAL, good heavens. Is there any truth to his being a lawyer?
(If so, that may explain quite a bit actually....)
 
Written By: looker
URL: http://
For people who profess to be such adherents of the free market, the difference between Reagaomics (Supply-side economics/trickle-down) and the communist supply-side planning is a very fine one. Supply-side economics is nothing more than a reward for any company, regardless of performance.

Please, if you are going to disparage people, like the Bush family (of which I am not a fan) at least do it honestly. The "voodoo economics" was in response Reagan’s supply-side economics that is an upside-down distortion of the free-market capitalistic idea where we now reward the producers through tax cuts versus letting the consumer (the free market) decide.

I know that I am going to be called all sorts of names, and that I don’t know what I am talking about and I am anti-captialist, Marxist or Communist and so many other terms because I disagree with the predominant view as expressed by the pundits, radio talk show hosts or the beliefs of people who will argue against me as the messagner, but can’t argue the message. So, I am prepared for it.

The free market is dependant on the consumer to make the decisions. The consumer is supposed to determine the winners and losers. Through their purchase of goods and services, the companies that meet their needs will earn the income which will allow them to earn a profit, capitalize their business and motivate them to improve their product or create new ones.

Therefore, if there shoud be tax relief, then the consumers who buy the goods and services are the ones that we need to get the money to. Let them decide. Instead, every company, regardless of performance is benefitting without the incentive to improve... it doesn’t trickle down... it floats into bonuses and perks and stock options.

What is really ironic, is that I will be the one accused of so many things because I hold to the traditional, conservative belief that the taxpayer, the person earning the money (regardless of income level) is the one who should be paying less taxes and let the companies compete for my business. Instead, it has been turned around.

Economics is a theory. It also calls for a very very careful study to separate the casual from the causual. For example... Reaganomics, or supply-side economics is touted as creating jobs and causing the economy to grow. Fine. By how much? Would an alternative system have caused a worse or a better change?

Jobs are created through tax breaks. Yet, the same companies (such as Kimberly-Clark) here in Wisconsin that were at the tax break signing in Madison when the governor signed the $10 million dollar tax break were laying off people a couple of weeks later. Here, two years later Kimberly-Clark is closing a bunch of plants. As the governor was signing the bill they were talking about how they could now use the money to create new jobs.

People are scared to even discuss this because it gets into name calling, such as "Marxist" or "Liberal" or anti-Capitalist. Even to discuss whether or not a particular theory gives us the best benefit becomes an opportunity for demogogary.

I questioned whether the NAFTA was working the way we hoped and whether the benefits we expected were happening and I was attacked. Why? Because I believed that we should evaluate theories and beliefs to see if they work... and if they don’t... can the be adjusted to work. But asking got me labeled as a "Liberal" who was "anti-business."

I did feel better though because I realized that this person wasn’t arguing from a perspective of knowledge, but purely from partisan "talking points".
 
Written By: Darren7160
URL: http://
I had a moonbat sputtering the other day. He went on and on about price gouging oil companies, etc... I finally reminded him that he paid 600k for his house 8 years ago and was able to find a sucker to pay him 1.5MM for it last year. How about a windfall profits tax on real estate I asked him. I thought his head would explode... :-)
 
Written By: Paul
URL: http://
A "moonbat" huh? See what I mean. Someone wondering how the price of oil equates to the price at the pump... whether or not there might be an opportunity for companies to make a more than usual profit takes it out of discussion and into name calling and marginalizing. Why would this person maybe be feeling this? Is a personal home investment gain the same as an oil company profit?

I understand the desire to believe in the free market system. Really, I do. But, it should be able to stand on its own without resorting to name calling or accusations concering the person’s intelligence. They talk about "transparency" which should mean the same as "accountability" when it was the welfare and education reform being discussed.

Where is the transparency in corporate America? Where is the budget showing how a tax break of XXX dollars will go into capitalization and jobs? The one thing that many apologists for the corporations try to not discuss is the fungilility of money... thus, any tax break can be used for whatever they want it to do.... not what the intent of the break was for.

People say that increased taxes will just be passed onto the consumer. Fine... but only to the consumer that purchases the goods and services from that particular company. Giving the tax breaks to the consumer will give the additional income to offset the increased prices caused by the taxes and only reward the successful companies.

See? Ther are many ways to look at things. They should be discussed... not "named" based upon whether or not they belong to a particular political philosophy... And, instead of attacking the person, attack the argument. Don’t tell me I am stupid, tell me where my logic is wrong or where my analysis falls apart... and how it falls apart.

So much is taken for granted because someone says that it is so. Usually around a political agenda. Such as the badness of governmental regulations and how they inheriently stifle the marketplace. Yet, when regulations were removed, we had the Savings and Loan scandals costing Americans $billion to clean up. We had insider trading that cose the investors (that would be you and me) $billions in lost potential earnings. We have the recent ENRON, Global Crossing and MCI scandals.

Degregulation of the market for energy brought us ENRON and the incredible rolling brown-outs in California during one of the most terrible heat waves in recent memory... oh, and an incredible profit for ENRON. So much profit as a matter of fact, they set aside $million in the expectations that they might have to refund some of it.

Following the fraud and abuse of the companies doing business in Iraq and the Guld coast is illustrative of what happens when we are not vigelent. No one should be given a free pass to do harm just because of a political or economic "theory".

So, calling a person a name based on the experience of companies taking advantage of the American people really isn’t a good strategy. Instead, maybe looking at the $billion and $billions lost to the consumer, tax payers and investors (again, that is us) because of a "few bad apples" would be more constructive?

If we weren’t continually giving away the farm and paying to clean up their messes (ever look at Superfunds?) maybe we wouldn’t have to pay such high taxes... maybe the poorly performing companies would go out of business and the companies doing harm would have to pay the costs?
 
Written By: Darren7160
URL: http://
Degregulation of the market for energy brought us ENRON and the incredible rolling brown-outs in California during one of the most terrible heat waves in recent memory... oh, and an incredible profit for ENRON. So much profit as a matter of fact, they set aside $million in the expectations that they might have to refund some of it.
That’s a sort of George Lakoff "frame" Darren, CA’s energy was NOT deregulated it was modified. The energy deregulation passed w/ Zero dissenting votes, or so I read. Whenever that happens bad legislation has been passed... CA’s market restructuring pleased Green-Weenies, Energy Companies, consumer groups AND CA regulators! The greenies got "Nega-watts", the consumer got a price cap and roll-back, energy companies got barriers to entry into the market, and the regulators got a spot market for power AND some extra revenue from companies like Green Mountain that tired to enter the CA market. The whole ""scheme" was based on falling energy prices, when prices rose the system collapsed. But let’s don’t call it Deregulation. To the extent it demonstrates the dangers of collusion between interested parties, rather than the free play of the "Market" it is a salutory lesson, but it isn’t Capitalism either.
Following the fraud and abuse of the companies doing business in Iraq and the Guld coast is illustrative of what happens when we are not vigelent. No one should be given a free pass to do harm just because of a political or economic "theory".
And the abuses HAVE BEEN???? Yes we HEAR about "investigations" into "allegations" but at the end of the day, we don’t find that fraud and abuse, do we? At least not by Slumberger, KBR, and Haliburton...
If we weren’t continually giving away the farm and paying to clean up their messes (ever look at Superfunds?) maybe we wouldn’t have to pay such high taxes... maybe the poorly performing companies would go out of business and the companies doing harm would have to pay the costs?
As I understand it, Superfund is NOT an example of your lament. Superfund has the Federal Government as the agent of Last Resort. Much of Super-Fund work is apportioning the blame and cost amongst the current and previous owners of the land contaminated. Your taxes aren’t going to Super-Fund sites, at least not in the quantities you imagine. Super-Fund is a GOLD MINE for lawyers, but not necessarily a sinkhole of your tax dollars.

IF you want me to defend the current economic situation in the US as "Capitalism" and ggggreat I won’t, because it’s not. But akin to the old story about the two men and a bear, it’s only a requirement that the system be BETTER than other operating systems. Which by-and-alarge it is... Markets confined and constrained as they are STILL work best to distribute resources in a fair and equitable manner, more so than government sponsored alternatives.
 
Written By: Joe
URL: http://
Please Joe, modified instead of deregulated? If it was regulated before and it wasn’t regulated after, what is it called? It went from companies controlled by Public Utilities Commissions to this mess. If this example, the Savings and Loans and others gives deregulation a bad name, then so be it.

Words have their meanings because of what the represent... not what we want them to portray. Just to be fair, here is a link to a Ca. Gov. website where they call it restructuring and deregulation.

http://www.energy.ca.gov/restructuring/

I was living in Riverside CA when this all went down... I had been paying my electric bill to the City of Riverside... There might have been people hoping that there was a "green" effect... but that really is beside the point. Their desire for a green effect wasn’t premised on the corporate greed.

I too can find information. From June 2000 to July 2000 the wholesale rates increased 270%! There had been a 2% decrease in capacity leading up to that time... but 270% in one month? Why just in CA?

As I said, I lived in Riverside, CA from 1985 until Dec. 31st, 1999. I never once had a brown-out or a loss of power not attributed to a power pole failure. How did this amazing lack of capacity come about? People speculating on electricity?


I love the name, Green-weenie. It really casts a derogatory image of any person that might be concerned about the environment. It shuts down any attempt to see if there can be a compromise between economic growth and preserving the enviroment.

I would posit that the loss of the homes by those of Three Mile Island or the loss of recreation to the people here in Wisconsin because of PCB’s in the Fox River is too high a price to pay.

Why is it if anyone wants to make sure that these don’t happen again, we are branded with names and treated as if we are talking about something that has never and will never happen? To what level of crisis must our environment rise before it is taken seriously?

There are small Lake Michigan counties here in Wisconisn being sued by the EPA because they are the unwanted recepients of the air pollution from Milwaukee and Chicago. Yes, it is silly to fine the place where the pollution gets blown to instead of the source, but it is even more silly to allow those pollutants to go into the air forever without a discussion of lessening them. Why is the EPA concerned? Because they are known to be harmful to people... and in this case, it is harmful to people nowhere near the source.

Does their concern about what is being deposited in their homes and lungs cause them to be labeled "green-weenies"?

Superfunds... I try when I post to verify my position, regardless of how well I believe I know the subject. Things just happen to fast or I don’t follow things for a while and lost track. So, before I proclaim something that can lead to people getting the wrong information I do try to check. In this case, you are right that the amount was supposed to be paid by the companies responsible... however, that is a bit out dated.

in 1994 the taxpayers paid 18% if the costs...by 2004 it has increased more than 241%. Here is a link with a break down of the cost to the taxpayers, state-by-state.
http://www.uspirg.org/StatebyStateCosts1995-2004.PDF

"In 1994, taxpayers paid $250 million for Superfund cleanups, or about 21 percent of the $1.2 billion fund, with corporate taxes paying $950 million, or about 79 percent.

Taxpayers paid $350 million in 1999, and since then have paid about 50 percent of the cost. Mr. Bush proposes that taxpayers pay $700 million, or more than 50 percent of the $1.3 billion fund, in 2003.

The fund itself will provide about $600 million in 2003. Even though the tax has not been collected since 1995, the fund has reserves because the Environmental Protection Agency has recovered costs from corporations and collected interest. But that amount is vanishing. By 2004, all the money will come from taxpayers."


Please note, money from corporations haven’t been collected since 1995. The residual money left when this report was created could have been because of underfunding of the clean up, the taxpayers paying to much previously or many other things... the point is... the level paid by taxpayers is a yearly cost... not the cummulative cost to date.
http://www.commondreams.org/headlines02/0224-01.htm


You are right concerning the allegations and all. Let’s see though, I am right about the Savings and Loans... those did make it through the courts and there were convictions. The Iraq and Gulf Coast? Well, they are being investigated... and there have already been plea bargins and convictions... I could place links, but a quick Google check by anyone should be sufficient.

Hopefully I will be around here as more convictions come about. Sometimes convictions aren’t needed, just an audit shows irregularities and are remedied without legal action. Avoids the lawsuits and the ackknowledging of criminal wrong doing. I don’t know if I will though. I am serching for a blog where people discuss issues based on merits... not people responding from "talking points" where I can copy and paste my responses because I have been over them before.

I am not familiar with two men and a bear... but I do know that to not honestly approach the reality of a situation, or desire to improve something because it is better than something else is not sufficient to give me goosebumps.

People want to argue philosophy and ideals, which is fine... but when it comes time where the reality is brought to the fore... well, I am not supposed to judge the whole based on the few. Yet, what has that "few" cost us the taxpayers? I am sorry, but I am not going to forgive their actions because of a political affiliation. Instead, I am going to demand that they live up to our professed beliefs.

I have tried to find links that would be acceptable, because I know that the usual response is to deny the information based on the source. I believe that each of the links are credible based on their being a government link or using government sources.
 
Written By: Darren7160
URL: http://
Darren, economics can SOMETIMES be understood as "punctuated equilibrium" things don’t change much until they SUDDENLY change. Your rates might have been something like that, BUT most likely you were simply seeing the delayed result of the rate restructuring plan.

Energy companies were forced to roll back prices under the plan, and were limited in rate hikes, BUT what they got was barriers to entry to the CA market. UNTIL a company had retired its sunk costs, i.e., costs of poor investments made previously, NO OTHER COMPETITOR WAS ALLOWED TO SELL ELECTRICITY AT ANY RATE CHEAPER THAN THE IN-STATE FIRM. So IF SoCal Edisson had unwisely invested several billion dollars in the 1980’s until that unwise investment had been amortized (?) no firm could under-bid them. In fact, SoCal Edisson DID pay off it’s debt eraly and so DID RAISE IT’S RATES AT THE ONSET OF THE CA ENERGY CRUNCH. However, CA then placed a moratorium of rate increases.

In the time of the crunch the cost of Natural gas skyrocketed! Producers had MASSIVELY increased costs, but could not pass them on. When the pass thru occurred it was very painful.

The Greenies opposed every new power plant in CA and CA’s usage outstripped it’s ability to produce it’s own power, it imported power from neighboring states. At the time of the crunch the Ecotopia states were suffering a drought limiting hydro-power and natural gas peaked in cost. The result of too much demand and not enough supply was a massive increase in the equilibrium price in electricity, at the wholesale level. It was not until later that the retail level saw commensurate increases. If you want to limit the usage of something, raise it’s price. Gray Davis revealed his fundamental economic ignorance by staing, I paraphrase, "If it was just about raising prices I could have solved this problem in about 20 minutes." Well yes Gray, that’s what was needed, increased costs would have yielded decreased usage.

Finally Darren you posit that Green-weenie is a perjorative and simply dismissive, and to an extent it is... however, you also mention PCB’s and an umber of other things. The fact is, life is TRADE-OFFS. You want no PCB’s in the environment, how many percentage points of GDP are you willing to give up for it? And will the resulting new paradigm be cleaner or less clean? Greens don’t seem to want to hear that. They want to "do good"

As an example, DDT. We have banned DDT as EVilllllll. OK, we’ve saved some species of bird, but at the cost of MILLIONS of human lives lost to malaria. Was it worth it? You can debate that, depending on your normative judgements, but to Greenies that sort of question never seems to come up... DDT BAD, BAN GOOD. No discussion of the trade-offs involved in the decision to ban DDT.
 
Written By: Joe
URL: http://
Joe,
You see? The issues are complex... such as the Superfunds. What we perceive or what we have been told is not always the whole story. Such as NAFTA and whether or not it is providing the benefits that we expected. Or, energy or savings and loan deregulations. Yes, in theory, these things probably should work. Do they? Is it wrong to ask?

NAFTA was believed to provide certain benefits... did it? Does it need to be relooked at before CAFTA? Or, do we not look to NAFTA to see if it is working and just continue on? What is wrong with emperical evidence? Pragmatic approach to economic beliefs?

There was a particular reason behind the concern of the building of electrical plants in CA. They are called fault lines... and there is a nuclear energy plant or two that are sitting atop them. The one at Humbolt Bay comes to mind. Which is interesting since there was such a lot of coverage over the 100 years since the San Fransisco earth quake. Preceeding bad decisions. Do we ignore them? Call anyone that mentions them a "greenie"?

Personally, I am not too happy with CA and glad that I left. Too many people in an environment not suitable for humans... but that doesn’t stop 20 golf courses in Palm Springs or everyone wanting a lawn like they had back in Ohio.

PCB’s were used for power transformers and in the making of Carbonless Copy paper... Do I think that the price we are paying is worth that? Probably not, because when I was in the USAF I was constanly cleaning up the leaking transformers with paper towels. That just makes me a statistic.

Why were the PCBs just dumped into our rivers? Because... well, maybe they though they were harmless. Did they try to find out? If someone questioned their being dumped, what would be the response? Greenies? Now, we have rivers here we can’t eat the fish from. Was it necessary to do that for economic growth? Could economic growth been achieved with some other product or component?

When value is mentioned as a measure of... let’s call it morality... do I place value on human life, clean air and water over money? Yes. Does that make me a bad person? Depends I guess. A "greenie" would propose using a bit of foresight into the decision making process instead of afterwards.

Going back to the Superfunds. Say that the clean up was entirely paid for by the corporations that caused the mess. Does the mess being there in the first place not matter? The fact that they need to be cleaned up? If we believe that any increased costs to companies (such as taxes) leads to increased costs for the consumer... would it not make sense that ultimately, it is the consumer who is paying for the clean up still?

I do not advocate blowing up SUVs though I don’t like them. I believe that along with our addiction to fossil fuels, as noted by the President, it was interesting that he had nothing to say about conservation of energy as a way to decrease our dependance on foreign oil or to preserve what oil there is. This world is a closed system, and what oil we have now is what we will have in the furture (not counting millions of years into the future).

I believe in prevention. Preventative maintenance on machinery, medician and corporate responsibility. Does that make me a "greenie"? Grouping people with concerns like mine into the "greenies" deminishes the discussion and turns me, and others like me, from being reachable so there can be some progress.

What is so surprising about history is that we continue to repeat the same mistakes over and over. Like children, we don’t listen to the wisdom of our parents because we know better, and we have to keep learning from personal experience.

There are so many tradeoffs that we do have to make. DDT? You are probably more versed in that then I am... Is it the only means of controlling musquitoes? If so, are there ways to disburse it other than spraying it the way they used to? I was one of those children like in the newsreels where guys sprayed it around while I sat outside.

We saved some species of birds? I don’t proclaim to be an expert and I would be hesitant to procalim any particular species as not needed. Do we know their effect in nature? I can see old fields taken over by one species or another of a foreign plant because nature wasn’t prepared for an invasive species. Animials are the same way... species close to extinction and then there are too many of them... loss of a natural preditor causing an increase in another species. It is a level of understanding and knowledge that cannot be found by pundits or politicans or corporations or even universitites alone. It needs to be worked on together for all... but that cannot be done because the lines are drawn.

We effect one thing and it has far reaching consequences. Can this be denied? Not philospohically or rhetorically, but by facts? Who decides which species is not imporant to the cycle? Pepsi that couln’t build the plant where they wanted? Riverside has a lot of available land... but everyone was upset at the "greenies" because the location was not a good one.

Even something seemingly as great as a green idea of ethantol, I know that it takes an incredible amount of oil to create a gallon of ethanol.

But, if enthanol is increased, then eventually we will be using enthenol to make the ethenol, just like we use oil to get oil.

You see, I want to explore all sides... not just label one as heretical. I know that increasing our dependance on corn to make ethanol causes an increased run off of nitrates which is causing an algae bloom in the Gulf that has a dead spot now the size of one of our smaller states.

Should this be discussed? Or, should we just say that it doesn’t matter because we need a)jobs b)free capitalistic enterprise c)to defeat the opponents in the next election?

What about the loss to come from tourism and fishing in the gulf if we choke all the oxygen out of the water? Should this, may this, can this be discussed? Or, will that lead to name calling and devisive rolling of eyes by pundits who are only out to gain market shares and make money?
 
Written By: Darren7160
URL: http://
Actually the article pointed out that the blame needs to be shared. The government’s policies, regulations and taxes are causing some of the shortage, but oil companies share part of the blame (due to the low profits from refineries and the natural desire to make as much money as possible) and consumers have to take a hefty part of the blame as well - because we keep using the gas at the prices they offer.

What I did not include except as a mention, because I could not find hard data, is my suspicion that at least some OPEC countries and international investors are manipulating the market to harm the US. I can’t find proof or evidence, but I am confident this is part of the problem. Certainly it doesn’t cost the oil producers so much more to produce gas, but they are charging a great deal more per barrel of crude.
 
Written By: Christopher Taylor
URL: http://networdblog.blogspot.com/
When value is mentioned as a measure of... let’s call it morality... do I place value on human life, clean air and water over money? Yes. Does that make me a bad person? Depends I guess.
I think it means you don’t understand what money is. Money is simply a method of exchange between one item and another . . . between, say, 40 hours of your labor and some product produced by another. Money allows you to figure out how many lines of code a computer programmer would have to write in order for him to purchase a new SUV or a house or a full tank of gasoline. In theory at least, it can be used to calculate the value of clean air and water and of life itself.
What is so surprising about history is that we continue to repeat the same mistakes over and over. Like children, we don’t listen to the wisdom of our parents because we know better, and we have to keep learning from personal experience.
Hmmm. I’m thinking "Population Bomb".
There are so many tradeoffs that we do have to make. DDT? You are probably more versed in that then I am... Is it the only means of controlling musquitoes? If so, are there ways to disburse it other than spraying it the way they used to? I was one of those children like in the newsreels where guys sprayed it around while I sat outside.
DDT is particularly cheap and effective, and it is also safe for humans. The US can make good use of alternate methods, but in Third World countries, the lack of DDT results in death.
 
Written By: Don
URL: http://
Again, the burden is not the Senator to explain what profit margin is "moral."
The burdn is on the Seantor to explain what level of profit is immoral.
The burden is on the opponents to explain why any limit placed on the margin would be immoral.
To place a limit on profit is to attack private property rights and the right to benifit from one’s labor. But this is a little different from the point of the post, which is that "big oil" isn’t making particularly big profits.
Now, are our laws based on morality? Well, in one sense, yes. Because, after all, the consensus is that a democratic system is inherently a moral one.
Frankly, I see capitalism as more inherently moral than democracy. However, assuming that democracy is inherently moral, it does not automatically follow that all laws created by democratic systems are inherently moral.

In our republican system, we have a Bill of Rights, which seems to be derived from an understanding that the legislature can pass immoral laws unless otherwise constrained.
 
Written By: Don
URL: http://
Price of gas has gone up lots just recently down here and I had been under the impression it was because more people were using more gas, but now thanks to QandO I see it is really America’s fault.

Bloody Yanks.
 
Written By: Unaha-closp
URL: http://
Hey, just cause you Kiwis live on the wrong side of the world doesn’t mean we’re to blame for how hard it is to get gas down there! Happy ANZAC day, a day late... although happy isn’t really the way to put it, is it?
 
Written By: Christopher Taylor
URL: http://networdblog.blogspot.com/
Please Joe, modified instead of deregulated? If it was regulated before and it wasn’t regulated after, what is it called?
It went from being regulated to being regulated. What they did was create a quasi-market for trading energy at the wholsale level, however the retail market remained fully regulated. Retail price controls remained in effect.
Words have their meanings because of what the represent... not what we want them to portray. Just to be fair, here is a link to a Ca. Gov. website where they call it restructuring and deregulation.
Yes, but "deregulating" was not really the right word to use. Deregulation simply did not occur. They attempted to "add" competition to a highly regulated marketplace, a marketplace that was consistently highly regulated.
I was living in Riverside CA when this all went down... I had been paying my electric bill to the City of Riverside...
I was in San Diego.
I too can find information. From June 2000 to July 2000 the wholesale rates increased 270%! There had been a 2% decrease in capacity leading up to that time... but 270% in one month? Why just in CA?
This is the best discussion I’ve seen on this issue:

http://www.cbo.gov/showdoc.cfm?index=3062&sequence=0#pt2
 
Written By: Don
URL: http://
You and I are roughly the same age. Haven’t you figured out by now that the Republicans are NO BETTER than the Democrats?
The above type of idea generally is proven by taking the worst of the Repubs and comparing it to typical or best-case Dems.
 
Written By: Don
URL: http://
Don,
I believe I understand exactly what money is... as in the representation of value. That is why, when I was stating that concrete, objective things such as the environment were of more value to me than the maximization of profit I thought it was was understood. I am not saying it is more important than jobs, the economy and our ability to make a living. There is a distinction.

Those that choose the mantra of "maximizing the profit of the shareholders" as the primary purpose of the company are the ones that got it mixed up.

I got my business degree from CSU San Berdo. The people in my classes were all young and worshipped the professors and memorized what they said to feed back on exams without any conceptualizing what these ideals meant. Maybe because I was a few years older, had been in the USAF for 10 years before going back to school... I tried to look at the larger picture of the adherence to a theory.

They couldn’t see anything beyond the squeezing out of the last bit of profit. Business ethics was a single class and wasn’t considered outside of that class. I belive that it should have been in economic, finance and other business core classes. It should have been a component of every class.

I have just completed a program at the local university for my teaching license and had to go back and get a minor. I choose social science because that is what I want to teach. I want people to be critical consumers of information. To question assumptions and presumptions. To think for themselves, find alternative viewpooints and judge.

We do need to discuss expectations of companies. What do we want from them? Are we wanting an immediate or slavish adherence to a fiscal quater or do we want long term growth that sometimes means less net profit? Do we invest in a company here in America and build the widget for a few pennies more or do we ship the jobs to Asia or Mexico and charge the prevailing wages which means no improvement for the people taking these jobs? Does the profit go towards development of new jobs in America, or does it go to the shareholders and company executives? Yes, we do need this discussion in America.

Even when companies are making record profits like IBM they are eliminating their employee retirement benefits. Why? Because they can... it isn’t because they need it to be profitable... they need it to be MORE profitable.

We can get into a philosophical debate over who determines what is considered a moral amount... but some things I do know...

a) A good return on a stock investment used to be one that was better than the return on a savings account. Not a means for overnight wealth. A company or their executives were not judged based on a single fiscal quarter. But if you look to things like Computer Associates and the guys pleading guilty... it is now about doing whatever it took to meet the analysis expectations... which included back dating contracts. Watch the value of the stock for Google the past few weeks because they might have been off a penny or two per share according to what their expected earnings should be. $Billions of dollars in market swings. That is an incredible amount of pressure. I worked a company that would rent a tractor trailer and park it outside of the lot so they could squeeze out the last product and place it on the truck and seal it so it made it into the fiscal quarter. This was done 4 times a year!

b) Underdevelopment or not increasing refinery capacity is the responsibility of the company. If they didn’t do it, then something tells me that they made that choice. Sure, someone can come up with "greenies" who complained about the building of a particular plant on a particular ground... but I believe that if the energy companies wanted to build bad enough... they would have. Complaining about environmentalists was just convenient for them to not put profits back into the company and pay it out instead as bonuses or dividends or buying back their stock, or any other of a myrid ways they wanted to do it other than increasing capacity. What is their incentive? If demand increases just charge more. If they have additional capacity then they would be producing more which would lower the prices.

c)Some companies used to be regulated heavily that is true. Some things were considered to vital to be left up to competition or the cost of entry (capitalization) was so high that it coud only be done by one or two companies... so they got the legitimate right to have a monopoly which gave then a captive market and a fixed rate of return. Increases needed to be justified. It was so successful that many bought these stocks because of their "blue chipness" which took care of their retirement. Someone got the idea that these were bad and it would be better for the free market to do the work.

It isn’t a free market if it is being abused by some at the cost to the many... those many being you and me... not some abstract demographic.

d) Company executives believe that they are entitled to the high salaries, retirements, perks, bonuses and stock options because of how valuable they are and what they do. I am watching ENRON and Lay and Skilling, Scrushy with Healthsouth... they were victims because they didn’t know what was going on in their own companies! That is just plain wrong. They are supposed to know... that is what their job description is! To effectively run the company.

Even professional trade magazines like
http://www.nysscpa.org/cpajournal/2004/1004/essentials/p44.htm
for CPAs realize this.

We can all have debates and I believe that is a good thing. Discussion leads to an understanding of people with opposing views as concerned people... not deamons or evil people. We all want what is best for ourselves, our community and our families.

Is DDT dangerous? I don’t know, I hated chemistry because I never understood it... but I do know that there is enough conflicting evidence out there that it should be looked at. Objectively.

PCBs? Same thing. Brain cancer from cell phones? Who knows... but I would rather have scientists using rigirous methods than pundits looking to increase their listening market to find out. Cigarettes? We were told that they weren’t addictive! And, this wasn’t that long ago. (Fair disclosure, I am a smoker and have been for decades) but I still hate being taken for an idiot.

One of these days I will sit down and try to determine the actual cost to the American taxpayer of the corruption of these "few" bad apples. In comparison to the number of companies, yes it is a small percentage... but the dollar amounts are incredible!!!! What is the loss to the taxpayer bailing out the savings and loans? What is the cost to the investors of the loss of their investment from ENRON, Global Crossing, Healthsouth, insider trading, TYCO and MCI?

Why would anyone want to defend them? They do more damage to the free market, the loss of confidence that people won’t be intentionally ripped of if they invest! The defense is their not having been convicted yet? Either through incompetence, mailice, greed or stupidity, the damage was enormous.
 
Written By: Darren7160
URL: http://
Underdevelopment or not increasing refinery capacity is the responsibility of the company. If they didn’t do it, then something tells me that they made that choice.
Interesting point. Yes it is the responsiblity of the company. And yes, they did make a choice. At the average price at which oil has been over the past 20 years, refining wasn’t very profitable. And because of that, there was no financial incentive to expand capacity at existing refineries.

Now there is, being driven by the market, and all we’re hearing is hell and damnation for the market doing it’s work. It’s as though cheap gas is an entitlement, and I’m afraid I just don’t understand that mentality.
 
Written By: McQ
URL: http://www.qando.net/blog
Refineries don’t make much money, and in fact they’ve been closing over the years. However, this has something to do with regulations, where people allow them to be built (the NIMBY- which has become the BANANA effect lately), and environmentalists suing and causing troubles.

As I noted in my article, President Bush recently signed a bill that is said to make the process of opening a new refinery cheaper and easier, so that might help. I know the President was making speeches about using old decommissioned military bases for refineries, that seemed like a good idea.

But it does come down to choice by the oil companies. They likely are not terribly upset at the increased prices they can get due to low supply.
 
Written By: Christopher Taylor
URL: http://networdblog.blogspot.com/
I am pleased that the President is doing something to help. Someone has to. Especially since some some in Congress are pushing for a windfall profit tax. I am confident it will backfire and trickle down to consumers. Why can’t they see this as the impending outcome? It’s so clear!
 
Written By: sugarsnap
URL: http://
"But it does come down to choice by the oil companies. They likely are not terribly upset at the increased prices they can get due to low supply."

High profits/prices typically attract new entrants to the business provided artifical barriers to entry do not exist. The legacy companies will have no choice; increased competition will eventually drive the prices down to a new equilibrium point. Furthermore, the entrance of new competitors to the industry will spurn the existing companies to increase their capacity in order to maintain market share. Competition, when allowed to work, is beneficial.
 
Written By: Unknown
URL: http://
McQ,
I don’t know if people feel they are "entitled" to cheap gas. That may not be the most accurate interpretation of their anger.

Let’s look at it another way. As religions, political parties and advertising agencies know, symbols have meaning. Impressions are often more important that the truth.

I don’t feel that people are upset, I know that I am not upset, if the profit margin of the company remains the same as the price of crude rises and falls. That is to be expected. However, if advantage of a natural disaster or a war is used for the opportunity to increase profits, that is considered price gouging or war profiteering and that has always been looked down on by the American people.

Some people want to say that this is a Christian nation built on and based on Christian values. I would argue that Christian values do not support taking advantage of peoples misery to make additional profit. That is why churches are so quick to open their doors and distribute food when there is a disaster, not run out and charge people for a blanet and a cup of coffee.

Typically, when a country goes to war the whole nation is mobilized behind the war effort. Military draft, rationing, war bonds, sacraficing... Everyone has a personal or emotional stake in the war due to actual service or a love one serving. There isn’t anything like that today.

Here, people are seeing oil companies that are making incredibly large profits, paying a +$300 million dollar retirement to an executive and wondering what is going on? Look to the secret energy policy formulation meetings by Vice President Cheney... that was our energy policy being formulated and they wouldn’t even tell us who was being consulted! Then, when Congress tried to find out, the head of the committee refused to have them testify under oath.

People are mistrustful and angry because the decision making is being taken out of their hands and conducted in secrecy. I hate to bring partisan politics into this, but it is interesting that the new phrase being spoke is transparency... where companies and countries (Wolfowitz and the World Bank) deal in the open to prevent abuse and corruption, yet everythign that is done in our own government is done in secret.

This was pre 9/11 when the secret energy policy meetings were being done. To use your question in another light... what makes the oil companies feel they are "entitled" to secret access to creating America’s energy policy?

We have demanded "accountability" in education and welfare reform. If public money is used then there should be a quantifiable result for the money spent. When we build an energy policy that gives tax breaks/incentives/relief/etc. to companies in the $billions of dollars, we want to see a benefit.

Much of where the oil companies get their domestic production comes from American lands... either sold, leased or given to them to use. Tax breaks have been given to them for years... with the expectation that it would help decrease or maintain the cost of gas for the consumers... we have determined that the oil rich countries of the middle east are in our sphere of "strategic interests" because of their oil which has put many of our young men and women in harm’s way...

So, maybe there is a reason that people do feel they are "entitled" to cheap gas. I have my opinion... I would love to hear yours.

Take the Alaskan NWR drilling arguments. The government and industry want to drill in Alaska, which is an America treasure and belongs to the American people. They say not to worry about another oil spill like the Valdez becuase we know better now (see above comments about not learning from history) yet just a while ago a tanker drifted away from the docks and ran aground! But, we are called the pollyannas or the "greenies".

The President in his STOU speech mentioned everything but cutting consumption. Conserving. We all know that multiply a couple of extra miles per gallon per car on the road and we are talking about enormous amounts of gas saved... for us, our children and our independence. But conservation will never be said without a snear by this administration.

If people really want to get upset, they should look at what the increase oil prices are doing for the people that we are trying to prevent from hurting us... Iran. And, Venezuela must be raking in the money hand over fist! They wouldn’t dream of dropping a dime in a collection basket for these countries, but they don’t realize that every drop of gas going into their cars supports them and any orgainzation they support.
 
Written By: Darren7160
URL: http://
Here, people are seeing oil companies that are making incredibly large profits, paying a +$300 million dollar retirement to an executive and wondering what is going on?
It’s all relative, isn’t it? The man was responsible for earning 38 billion for Exxon during his tenure. Let me ask, if he had earned say 3.8 million for a company, would $40,000 have been too much compensation for his performance?
If public money is used then there should be a quantifiable result for the money spent. When we build an energy policy that gives tax breaks/incentives/relief/etc. to companies in the $billions of dollars, we want to see a benefit.
Interesting that the only "quantifiable result for money spent" being demanded happens to concern oil. Social Security, Medicare and Medicaid? No biggie. The War on Poverty? 3 trillion, with a ’t’, down the rat hole since the ’60s and we haven’t moved the percentage of those living in supposed poverty down even a half of a percentage point.

But let an industry who makes 8% profit in the good times and is reacting to rising demand for a commodity in the neighborhood of 20% a year make a little more than it has in past years, and the sky is falling.

It seems interesting to me that we hear all the rhetoric saying "we must make a concerted effort to discover and use alternative energy" but when market forces finally begin to provide the incentives to do so, we want to turn back the clock and decrease the price of the very commodity which we claim to want to replace.

Make sense to you?

 
Written By: McQ
URL: http://www.qando.net/blog
Unknown,
Your response could have come straight out of a textbook. Are you by chance a student? Your statement mentions artifical barriers... it has been a while since I took economics, but I remember that there was a cost of capitalization that was also a cost of entry (see above statements concerning public utilities and legal monopolies because of this).

We are talking about multiple billions of dollars just to start up... and the trend has been towards consolidation of oil companies, not more individual companies if you look to the past mergers.

I used my knowledge of the theory of Free Trade to support NAFTA. My expectations, based on the theory and the promotions of the proponents was that a decent wage (lower than our’s but still better than what they would normally make) paid to the workers would create a growing working and middle class in Mexico and also translate into lower prices for us. This growing group of consumers would use their discretionary income to buy American products and benefit us.

In theory... it would have worked. But, as one person told me... the companies aren’t doing anything illegal if they pay low wages to the workers, keep the prices the same to the consumers and pocket the profits.

Sugarsnap,
I am a firm believer that money does not "trickle down"... it floats. Additional income/profit from tax cuts or government intervention is used as justification for what a great job the companies are going and goes into bonuses, increased pay for executives, stock options, buying back stock or a vast array of ways to take advantage of it. It also artifically increases a fiscal profit not attributable to actual earnings due to providing a good or service which just causes expectations for the next quater to meet or exceed the last one.

Have we seen lower prices due to manufacturing going to Mexico because of NAFTA? Does the NIKE shoe cost less because of the lower wages of a 3rd world producer? Do Disney shirts cost less because of the low wages of the manufacturer? Or, does any benefit of the lower wages go to the companies, their executives and their shareholders... or, if a CEO gets $300 million dollars for retirement, is that really a good deal for the shareholders?

In theory gentlemen, each of your arguments have merit. Run on a spreadsheet they would give you the results you believe. However, in reality... are these things true?

Money is fungible.. that is why DeLay is in trouble... money from different sources placed in a pile and there is no way to account for what money is used where. Thus, a tax break for a particular reason does not equate always to a large increased spending by the company towards the goals of the tax break. It can mean that the company underfunds the goal with the tax break making up the difference. Net result towards the goal... zero. But, the company now has the money they didn’t fund to do whatever they want to.

McQ,
Relative it is. How much was his contribution, unique to him only, attributable to this profit? When a company doesn’t perform well, does that mean he makes a relative amount less? Compensation is always open to interpretation... why not $150 million? Why not $500 million. Why is it wrong to ask?

I heard the same arguments about Lay, Skilling, Skrushy, Eisner and all the others. Yet, when things go bad... it isn’t their fault. Sigh. They want the glamour, adoration and multiple-millions but they aren’t responsible when things go bad. It was market forces, bad media, corrupt underlings... Comapanies go into bankruptcy and the people that oversaw the companies decline are the same ones being paid to take it through... but it isn’t their fault... they were victims of things outside of their control.

Why is it outside of their control when things go bad, but their wondeful management when things go good? Executives of publicly owned companies are not the owners. They are employees just like the rest. They go through annual evaluations and need to justify their contributions to the company. Isn’t their promotion also relative? Possibly a percentage tied to net profit would be better, that way the pay is tied a bit more to their performance, but then you get the forces contributing to playing with the numbers.

$300 million. If a plant was costing that much above and beyond what is was contributing to a company... don’t you think there would be very serious discussion of what to do about that plant? Retooling, closing down, shipping overseas? Why is it wrong to discuss whether or not one person is worth $300 million for retirement? Retirement. This is not for continuing contribution to the company, this is for riding off into the sunset.

We like to believe that America is a meritocracy, but while there is collusion between boards of directors and executives concerning compensation is it really based on merits? Again, the transparency. Unless you are a very large shareholder... your voice is unheard and those millions should be justified because they are coming out of your pocket. Is that man really worth that much to you? Do you not feel entitled to ask if you are a shareholder?

When you hold two similar products at the store, are you not entitled to ask which gives you the most value?

If you read my responses carefully, what I have been talking about is accountability, or transparency... such as any benefits from the America people, in tax breaks, use of public lands, trade free zones (NAFTA and CAFTA) or American service people being placed in harms way because of our strategic needs for oil should make them accountable to the American people.

You mention 8% net profit. Finance and accounting is like statistics... you have to really know the underlying assumptions and story behind the numbers to have a real picture of what they represent. Net profit is after all expenses have been paid. Right? So, are their ways to corporatly and personally benefit that increase the expenses and keep the net profit low? Making an impression of low profits being a problem? Isn’t capitalization and wages/salary compensation in the equation before we come to the net profit?

Is it not possible to take from the gross profit and spend the money on perks, bonuses, stock options, retirement payouts, etc.? Thus, if your gross is increasing you can increase benefits without increasing net profits. Theory versus reality.

I do have my business degree. I understand the theory and I agree with the theory. Why is it wrong to want reality to reflect what the theory says it should be? I believe that this is a better goal than to shrug my shoulders and blindly continue to espouse theory at the expense of what I am seeing.

I never mention increased taxes. I never mentioned prosecuting anyone. What I do mention is that benefits to a corporation at the expense of the American taxpayer should equate to a benefit... and if the benefits are not being met... then they shold be looked at. Or am a I wrong? Do we base our decisions on emperical evidence or on theory?

A family member pleads poverty and you loan them money only to see the father go out and buy a bass boat... don’t you wonder? You are talking about $3 trillion dollars over 40 years benefitting Americans? Yet, what has the cost of this current administration been? What do we have to show for it? Who has benefitted?

We talked about money representing value and worth, not having worth in itself. If a child gets a free lunch at school... then yes, I value that over the reason why that child isn’t being provided first and foremost. I want the child fed before I work on anything else. If it went down into a bottomless pit I would still want that child fed. I don’t want a bottomless pit and that is why I have no problem with accountability... it shouldn’t be a free for all.

People try to not look at the true costs... yes, we want cheap burgers or the lowest prices, but along with that comes additional costs. The burger place is able to sell their burgers at a reasonable price because they pay low wages and no benefits... when that worker gets sick, who pays the cost? We do in either direct costs related to state medical aid or through indirect costs when the hospital writes off the account and charge the people who pay more.

It isn’t all so simple. It doesn’t all fit into a neat bumper sticker slogan and I try to look at all sides such as the "costs" associated with ethanol.

This isn’t big bad government preventing someone in their garage from creating the better mouse trap... this is a discussion of benefits to companies at the expense of the American people. Accountablity I would say. In what we pay directly at the store or indirectly though governement intervention, the environment and in the lives of our service people. We know that our interests aren’t about oil in the middle east... it is about democracy... that is why we are just as concerned about democracy in countries that don’t have oil.

I find it interesting that my discussion of the relative value of the executive is presumed to be an indictment of something... I am not sure what. Why is it wrong to discuss it?
 
Written By: Darren7160
URL: http://
I don’t really see how adding more taxes is going to have many positive effects. There is no need to punish oil companies for profiting in the U.S. (particularly when, for some companies, most of their business is done outside the U.S.), and it will only take money away from the billions of dollars these companies are investing in fuel alternatives, more efficient practices, etc. It seems to me that solving the problems we’re having is about a) personal conservation (as mentioned above) and more importantly b) government policy. If our legislators could enact comprehensive energy policy that allows access to domestic oil sources (like Bush mentioned with the ANWR) and loosens regulations on oil companies so that they can produce more cost-effectively, we may be able to combat the supply problems that are serving us with ridiculously high prices.
 
Written By: Smith
URL: http://
I believe I understand exactly what money is... as in the representation of value. That is why, when I was stating that concrete, objective things such as the environment were of more value to me than the maximization of profit I thought it was was understood.
Value is, of course, subjective. But that also applies to the value of "concrete" things such the environment. In any case, it appears to me that you’ve changed your statment somewhat . . .
Those that choose the mantra of "maximizing the profit of the shareholders" as the primary purpose of the company are the ones that got it mixed up.
No, they got it right! That is the purpose of the company.
I got my business degree from CSU San Berdo. The people in my classes were all young and worshipped the professors . . .
Suggestion: you need to focus your arguments better & loose the off topic comments. Most people will blow past long arguments, particularly if they don’t focus on the argument at hand.
We do need to discuss expectations of companies. . . . Are we wanting an immediate or slavish adherence to a fiscal quater or do we want long term growth that sometimes means less net profit? Do we invest in a company here in America . . . or do we ship the jobs to Asia or Mexico and charge the prevailing wages which means no improvement for the people taking these jobs? Does the profit go towards development of new jobs in America, or does it go to the shareholders and company executives? Yes, we do need this discussion in America.
It seems to me that the only ones who need to consider these things are the owners of the company. It is, after all, their investment.

One note: if the jobs in Asia & Mexico don’t represent an improvement to the people there, why would they accept those jobs? Why wouldn’t they continue their present occupation?
Even when companies are making record profits like IBM they are eliminating their employee retirement benefits. Why? Because they can... it isn’t because they need it to be profitable... they need it to be MORE profitable.
I’m sure they would simply eliminate all those jobs if that made them more profitable. Companies exist for the profit of shareholders. Their number one ethic should be aimed at maximizing that profit.
Underdevelopment or not increasing refinery capacity is the responsibility of the company. If they didn’t do it, then something tells me that they made that choice.
The purpose of increasing capacity is to increase profit, not to reduce consumer costs. The company has a fiscal responsibility to do what it takes to maximize profit. It is possible that they fell through with respect to that responsibility, but something tells me it is more likely they did the right thing: government regulation exacts a hefty toll on new developments.

 
Written By: Don
URL: http://
I find it interesting that my discussion of the relative value of the executive is presumed to be an indictment of something... I am not sure what. Why is it wrong to discuss it?
Seems to me the exec’s value is for his employeers to decide. Anyone can discuss it, of course, but you have no real say, and you shouldn’t have any real say. Unless you are one of the people paying his salery.
 
Written By: Don
URL: http://
Politicians, and a lot of citizens, are quick to trust the government with a lot of money in taxes rather than trust corporations with that money in profits. But history tells us that money is better spent by the people directly rather than being filtered through the bureacracy and special interests of government.

A windfall profit tax makes no sense, was tried and failed in the ’80s, and would be a terrible idea today. It’s just another way for government to get their hands on money that is better spent by the people.
 
Written By: Sienna
URL: http://
Bravo to all of you who have correctly deduced that a WPT ultimately hurts consumers while growing government coffers!
 
Written By: FOS
URL: http://
Don,
You ignore the premise of NAFTA and its benefits... the reason behind the fair trade treaty. So, it is sold as one thing... it doesn’t meet the expectations... tough. Too darn bad. Oh well, let’s get started on the next treaty (CAFTA). Talk about not reviewing objectively the prupose of the "theory".

They get massive tax relief and to question what the CEO is paid is none of my business? Excuse me, but it is.

For the life of me... I really cannot understand this undying devotion to the belief in the rightness of a company relentlessly seeking the maximum profit to be so wonderful when evidence abounds of the effects of the greed.

Are there no ethical limits in which a company is restrained when it comes to maximizing profits? We should trust them to maximize profits above anything else? I understand the fiduciary responsibility just fine. I also understand the cost to the taxpayers when corporations go beyond "reasonable" and "prudent"... but it was legal, I guess. Right? Three-mile Island? Superfunds? Savings and Loans having to be bailed out. Investors... those self-same owners of the companies loosing everything by incompetence, greed or illegal actions. But hey... you can’t question a CEO because he is immune from answering to anyone but his shareholders.

As retirement funds are increasingly investing they are having a much bigger say in the pay of executives. This might help benefit the shareholders that don’t have a large enough vote to change company policy because the shares are spread out and their isn’t a real alternative.

Actually, there is. It is called labor unions and there has been enough abuse that I believe they will be on the upswing... the only reason... the only reason companise every gave a damn was because they knew if they didn’t then a union would move it. With the decline of the unions the power has shifter disproportionately to one side and there will be a counter balance coming... and companies will only have themselves to blame.

Oh, and as a teacher, I don’t have to worry, because I will have wonderful retirement benefits so when I worry about American workers loosing their benefits it is because I am a moral caring Christian person... and because guess who will pay for their bills? You and me. But heck the company maximized their profit.

It is one of the reasons I have always questioned the strange grouping of the Christian right with the Corporate America. As I have been told by some... companies are morally neutral (choose whatever phrase fits). So, legally they can comply with the law but morally be reprehensible. But, hey, that is okay.

I suppose you get just as upset at the conservative Christian right within the Republican party when they try to boycott a company that gives same sex benefits because that is what the market demands in that labor pool? What right to they have to question what a company does.

I am sorry, I will not worship at the altar of a company, nor will I let them do whatever they want just because they want to maximize their profits.

If a company is a person in the legal sense, then they should be held to just as stringent standard as we hold our neighbors. Don’t disturb us, don’t let their filth enter into our yard, don’t turn their frony yard into a junk yard because they make more money from it then leaving it empty.

You want to talk about taxes... look at the cost of the bailing out of these companies and the damage they do to us taxpayers. But, heck, we don’t have a right to quesion them or to have an opinion that is contrary to what the textbook says is the way that the system should work according to theory.

I have had this discussion before, so before you tell me how much the companies are paying for the Superfund clean ups... check recently. That is our money. Our taxes. To me, any company that gets any... and I mean any preference from the government has allowed themselves to let us get right into their hip pocket!

Accountability. Transparency. Check it out... it is the latest buzz word from the neocons and the conservatives who are trying to get their good name back.

Lastly, if my thoughts are not "focsed" enough, then a person is more than welcome to pass right on by. I don’t get my thoughts from bumper stickers, 3 mintues between station breaks on a talk radio or from memorizing vocabulary and theories from textbooks.

It is called constructionism in the education field. I make connections, I construct knowledge based upon prevous learning, experiences and new information to come up with my ideas and thoughts. It requires being skepical and thinking for myself rather than what a textbook says.

If people cannot or do not want to follow the reasoning of what I have to say... skip my posts.
 
Written By: Darren7160
URL: http://
I thought this was a free country where people were able to fullfill their dreams and be prosperous. Since when does our govenrment have the right to tell us how much we are allowed to make? The Exxon’s of the world should be applauded for running such a tight ship and for being so profitable. Afterall profitable companies like this pay enormous amounts of taxes and invest billions of their profits back into our economy! There is no need to tax them any further!
 
Written By: Gabbie
URL: http://

 
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