This Week’s Question: What do you think about US oil companies making record profits during the recent spikes in oil prices?
Next Week’s Question: Has America become “too politically correct?” Where does the line between PC and freedom of speech lie?
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Dustin Siggins – Republican
Well, the Democrats and RINOs-Republicans In Name Only-have done it again. According to CNN, these senators are accusing “the CEO’s of the nation’s three largest oil companies – Exxon Mobile, Chevron, and ConocoPhillip, as well as the heads of the U.S. units of BP, and Shell Petroleum” of price-gouging. CNN’s Chris Isidore also reported that New Hampshire’s Judd Gregg-normally a loyal conservative-is pushing for legislation to charge oil companies a windfall, or excess profit, tax. The issue here is simple-during the third quarter of this year, the aforementioned companies made record profits. Senators don’t like it, and three are even accusing these CEOs of lying. Senator Frank Lautenberg, asking if there was a meeting with a Dick Cheney- led task force regarding energy in 2001, was told that there was merely an energy outlook meeting. Senator Barbara Boxer was next, with another accusation that the representative from Shell lied to her regarding the attempted sales of a plant in California. She stated that the company’s Former Chief Executive Officer sent her letters in early 2004 stating that they had no intentions of selling their plant. Shell’s current CEO claims that it did throughout the year, though no such transaction took place. Senator Maria Cantwell, not to be left out, claims oil was diverted from the U.S. to drive up costs, and has so-called “proof” to back up her accusation. Of the three, Cantwell might have a case. Lautenberg can’t prove anything, and Boxer’s accusation has huge holes in it. It is the executives’ words versus theirs, and given how it is currently a crime to be rich in America, I will back the CEOs every time.Back on track, who cares if these companies made a record profit? In one case there were 9 billion dollars net income earned, a mere 9 percent profit on 100 billion dollars gross income. You don’t see a windfall tax being pushed on anyone in the home-building industries, where prices are skyrocketing and having a far greater effect on American lives. In regards to price gouging, oil prices are high for several reasons. The Organization of Petroleum Exporting Countries, or OPEC, has decided not to produce at their highest capacity. This lack of supply, combined with China and India’s increased demand, will boost prices. Also, Americans use oil far too frivolously, and when the target market is willing to pay top dollar for a product, suppliers will keep their prices. Lastly, the federal government employs tariffs. These taxes on imports drive up the costs of gas-efficient vehicles and oil, and drive down the numbers of consumer-friendly foreign vehicles entering the nation. Making a profit is not a crime, nor should it be. Furthermore, if the companies had charged less then their competition, we would be accusing them of undercutting prices. Please write your senators and ask them to concentrate on real issues.
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Jon O’Neil – Libertarian
What do I think about the major U.S. oil companies making record profits this past quarter of the fiscal year? I think it’s absolutely terrific. Some people are aghast that such profits are made at our expense; however this is simply the success of the free market. Higher prices mean higher profits. Some people, democrats and republicans alike, would have you believe that we are living in the age of robber barons and that these companies are evil for what they have done. This is simply not true. Oil companies need profits exceeding costs if they are to stay in business, and they must have windfall profits if they are ever to expand and search for more oil to bring supply back into accordance with increased demand. We should be cheering these record profits, not castigating them. It is an unfortunate failure of our education and political systems here in America that we still don’t understand the basic foundations of economics. I’m going to give a little lesson in basic profits right now so all you liberals might learn something because it is evident in this constant debate about profits and prices that you do not. First, there’s normal profit. This is defined as the minimum amount necessary to keep entrepreneurial resources in their current usage in the long run. Normal profits reflect the opportunity cost of using funds to finance an operation. They must be equal to, or greater than, the returns available elsewhere in the economy. Windfall profits are profits in excess of normal profit that are above and beyond that necessary to keep entrepreneurial resources in their current usage. Windfall profits also serve as a signal that there are unmet human wants. This is what happens when there is a natural disaster that creates a shortage. Suppose there was a hurricane that destroyed all the corn crops in New England and I grow corn in Ohio. Prior to the hurricane the price of corn was the same in both areas, about 3 dollars. Now let’s say I went to New England and sold my corn for 15 bucks, earning huge profits. When the word realizes that there are huge profits to be made, other people will come to New England and sell their corn or will switch their crops to corn for a huge profit in New England. Conservation will then happen in other places and eventually the price of corn will fall in New England due to price competition. Now suppose our politicians said people are profiting from the misery of others, and we’re going to impose a windfall profits tax on corn growers? Would this be a good idea for the people of New England? Do you think anyone would go through the effort of getting corn to New England if it was heavily taxed? This is the foolishness of our current politicians. They want to punish companies for succeeding. There were changes in scarcity conditions in the gasoline market. Prices changed to reflect this and companies profited. U.S. oil refining capacity is now less than it was in 1980, and since that time there’s been a 25 percent increase in demand. Because of costly environmental regulations, it’s been 30 years since a new refinery has been built. We should be happy for these record profits because now oil companies might be able to invest in refining more areas that they could not before because they did not have enough profits to make such an investment. In conclusion, profits are good. Don’t listen to the sophistry and lies of yourpoliticians. Companies are not greedy; they are here simply to meet your demands.