As you may have heard, Republicans in the United States Senate recently stalled a proposal to impose a 25% tax on “unreasonable” profits from the 5 largest U.S. oil companies.
Nobody likes paying $4 a gallon for gas but if you want cheaper gas the last thing you should do is impose an arbitrary tax on “unreasonable” profits (defined by whom? the oil gurus in the United States Senate?) on the very companies that can save us by either 1) producing oil more efficiently or 2) putting their profits to work to develop new sources of oil and/or new energy mediums that will eventually replace oil.
Oil companies are not stupid.
They know oil is not going to last forever. They know if they want to survive they need to be “energy providers,” not just “oil companies,” and be the first to find and bring to market the new types of energy that will eventually replace oil.
The companies that don’t figure this out and don’t spending their record profits on 1) producing more oil more efficiently and 2) developing the next generation of energy sources will not be around in 10 years to feel sorry for themselves.
My point: the top 5 US oil companies don’t need the United States Senate to tell them how to run their businesses.
If they did they wouldn’t remain in business for long nor produce a single drop of oil.
The United States of America is a free, capitalist country.
Our economic greatness stems from the freedom entrepreneurs (and the investors who back them) have to take risks, bring valuable good and services to market, and be rewarded for doing so successfully.
Oil, and the gasoline it yields, is one of those products.
Those who have the talent, know-how, and will to find and bring oil to market (and the investors who support them) should be rewarded for their hard work.
The rewards for their accomplishments are what keep the best and the brightest entrepreneurs coming to the United States of America to do business: they don’t have to worry (as much) about the government taxing or seizing the goods and services they’ve worked hard to produce.
They get to enjoy the fruits of their labor.
That’s what a free capitalist country is all about: if you aren’t happy that oil companies are making all that money you are free to go and form your own oil company and compete.
The free market sets the price people are willing to pay for oil and gas.
If you don’t like the price of gas, there is an easy (though I admit painful) solution: stop buying it.
If you claim you can’t live without gas so my point is moot, just think of how bad it would be if the top 5 US oil companies decided to stop producing oil tomorrow.
The current rise in oil prices is being driven by 3 factors:
1) Supply and demand (a fundamental economic reality; this is where we need to focus our efforts); and
2) Speculation (part of the price we pay for having a free market); and
3) Inflation (caused by the very spendthrifts in Congress who came up with this ingenious oil tax plan to save the country; see my previous post).
http://www.myreferenceframe.com/economics/high-oil-and-gas-prices-whats-going-on-here/
The “windfall tax” does nothing to solve any of these issues:
- If you want to curtail demand domestically you need to raise taxes on oil consumption not production.
- If you want to increase oil supply the best way to do it is to open more areas in the United States to production, not tax the producers.
- The oil consumption and production of other nations is not a factor under our control. If it was gas wouldn’t be $4 a gallon.
- Speculation in the oil market exists and is causing the price to rise. However, it will not last forever (that is the nature of speculative enterprises). Moreover, if the United States Senate wants to place limits on oil speculation gains do they also propose to cover speculator losses when the bubble bursts?
- The best thing Congress can do to stop the rapid rise of oil prices is to stop spending money we don’t have and making our currency worth less.
- Please see my previous post on this issue but briefly, oil is traded in dollars. As we increase the money supply through the United States Treasury mechanism and low interest rates but fail to provide additional goods and services that have real economic value to back that new money, we weaken our currency and everything we buy becomes more expensive.
And another thing: if the tax is such a great idea why tax only the top 5 oil companies? Why not tax every last one of them? Wouldn’t the “lowering effect” on gas prices be much greater?
I am no fan of Congress but it is a good thing for America that this bill was never brought up for debate: it was only an opportunity for irrational Senators to propose taxing the very people who get all the oil for us (not to mention the rest of us who own pieces of the oil companies through our retirement accounts).
In response to the Republicans stalling tactics, Senator Claire McCaskill of Missouri was quoted as saying: “This was politics at its worst.”
No.
The whole incident was demagogy at its best: offer no solutions; blame the people with the deepest pockets.
