# Anybody who says that the oil companies "price gouge" are pinheads. **URL:** \ **Category:** The BBQ Pit\ **Created:** [April 15, 2008, 6:18am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412 "2008-04-15T06:18:44Z")\ **Posts on this page:** 20\ **Page:** 9
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [April 17, 2008, 4:48am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/161 "2008-04-17T04:48:25Z")
[QUOTE=Richard Parker] Like I said, this is an uncharitable and simplistic. It does not explain the people doing just fine economically who favor a windfall tax. It does not explain the economists who favor a windfall tax. It reduces your intellectual opponents to caricatures, based on armchair pop psychology. I don’t expect better from everyone on this board, but I’ve come to expect better of you. [/quote] What percent of economists support this type of tax? > [@](#): > > Corporations _are_ “us.” When we tax a corporation, we are taxing shareholders. Additionally, it might result in higher gas prices, as you suggest. And while some of the revenue would be used to lower this burden on the groups most affected, it would certainly still be a tax we would all pay for. Well, I thought this thread was about lowering gas prices. If you’re going to make a policy that may increase gas prices, at least you’re honest about it. > [@](#): > > The oil companies know they are potentially subject to such a tax. They were under such a tax not long ago. If there’s any perverse effect based on the expectation of such a tax, it is already happening. I think that, empirically, such normalizing of risk doesn’t happen for various market reasons. Oh, come on. Operating under the assumption that a tax once existed isn’t going to be different than if the tax actually is implemented? Well, let’s bring back the 90% income tax, then. Everyone must’ve already factored in that possibility since it wasn’t long ago that we had it. > [@](#): > > Taxing windfall is analogous to taxing inheritance. We prefer such a tax because we prefer to marginally disincentivize the activity over further disincentivizing innovation, work, or intelligent investment. No, it’s not the same at all. With something like future profits, you’re dealing with risk. Anything you do to make those future profits more at risk are going to reduce that activity. > [@](#): > > Well, it is certainly true that part of the benefit of a robust and free commodities market is to manage risk. If half the supply of oranges is about to be wiped out, we want there to be a bunch of investment in the supply that will remain. > > But I think the oil market is a bit different. The sorts of events we’re trying to manage are tied up with the industry itself–middle east politics, OPEC, climate change, fuel standards, etc. Rewarding those who invest in oil because they expect the President to provoke Iran is not quite the same as rewarding those who invest in oranges (or houses) because they expect the commodity to appreciate. Maybe I’m wrong in drawing such a distinction. > > The latter seems more like a windfall than the appreciation of your home (which is not a commodity per se, but I think is analogous. Is there no distinction to be made there? Even if there’s not, it seems to me that we still might want to tax the luck of your home’s appreciation more than we tax your innovation or labor. Why? ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [April 17, 2008, 5:03am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/162 "2008-04-17T05:03:33Z")
Request to the Mods: Luminous ones! This unworthy makes so bold to suggest that this should be moved to GD. The main guys want to conduct the discussion on a level of formality that forbids rock 'n roll. Even \*\*The Nameless One \*\* has resurfaced, and in _entirely_ correct GD protocol! If not miraculous, at least extraordinary, and a positive development. Sometimes the energy goes in reverse. Acknowledge this, move to GD. On probation, or course. ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [April 17, 2008, 5:16am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/163 "2008-04-17T05:16:40Z")
[QUOTE=John Mace] What percent of economists support this type of tax? [/quote] Heh. I have no idea. If I had to hazard a guess, I’d say the same number that support a minimum wage. A distinct minority to be sure, but they make arguments from within their discipline that merit sober consideration–or at least something more than a dismissive insult. > [@John Mace](#): > > Oh, come on. Operating under the assumption that a tax once existed isn’t going to be different than if the tax actually is implemented? Well, let’s bring back the 90% income tax, then. Everyone must’ve already factored in that possibility since it wasn’t long ago that we had it. That’s an unfair analogy. The windfall tax is by definition a temporary tax, revived from time to time based on windfalls. The fact that it existed the last time we faced this scenario creates a likelihood of its revival quite above the likelihood of seeing 90% income taxes any time soon. > [@John Mace](#): > > No, it’s not the same at all. With something like future profits, you’re dealing with risk. Anything you do to make those future profits more at risk are going to reduce that activity. Explain that to me. A windfall tax places profits gained as a result of the windfall (some margin Congress deems to be the windfall margin) at risk. This makes the companies less profitable, true, but they remain an incredibly good investment and will _still_ be taking in absolute profits well in excess of any other industry. What activity is reduced? > [@](#): > > Why [would you rather tax luck than labor]? I’m operating under an assumption that whatever it is you tax, you marginally discourage. I’d rather marginally discourage reaping the benefits of luck than marginally discourage labor or innovation. ---
**Author:** ![Euthanasiast](https://avatars.discourse-cdn.com/v4/letter/e/6f9a4e/32.png) [@Euthanasiast](https://boards.straightdope.com/u/Euthanasiast)\ **Post date:** [April 17, 2008, 5:29am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/164 "2008-04-17T05:29:48Z")
[QUOTE=Declan] So if that demand were removed, then the pool of available oil and gas were to go up and our prices would come down , is that a fair assessment ? Declan [/QUOTE] Yeah, but that simply isn’t possible at this point. I think the only real answer for America in the immediate future would be to cut our oil import by half and replace the difference with oil extracted locally until we can find realistic means of eliminating our dependency on oil altogether. This biofuel idea simply isn’t an answer, as it takes as much corn to fill an SUV once as a single person’s annual consumption, and the deforestation that is occurring to make way for the biofuel industry is causing more harm to the environment than it’s probably worth. ---
**Author:** ![Weirddave](https://avatars.discourse-cdn.com/v4/letter/w/919ad9/32.png) [@Weirddave](https://boards.straightdope.com/u/Weirddave)\ **Post date:** [April 17, 2008, 6:01am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/165 "2008-04-17T06:01:14Z")
[QUOTE=elucidator] And yet, they always make money. Airlines falling like forsaken sparrows, Big Oil makes money. Banks and investment firms running around like chickens with a radical craniotomy, Big Oil makes money. Democrat administration, Big Oil makes money, Republican administration, Big Oil…well, lets draw a veil over this, this is a family board… They must simply be smarter than everybody else. No other answer for it, everybody else fucks up, but not the oil industry. (This would explain the draw for a certain bright young MBA to begin his meteoric fall to power.) They’re simply smarter than the rest of the running dogs, they’re the alpha running dog, the sled dog with a view. Now, some may carp and cavil that they simply\* hire\* the smartest lawyers, accountants, and Congresscreeps, but, really, isn’t that, in itself, a very intelligent decision? It is wise, is it not, to recognize the limits of ones own intelligence? I certainly hope that I would, if I should encounter any. But I digress. Through it all, they make money. No matter what, when they come to testify, they aren’t dressed in suits from the Men’s Wearhouse, they don’t take the bus. I put it to you that this can only be the result of a superior cognitive capacity. Either that, or the game is fixed. (The long association of the Oil Industry with the great state of Texas cannot escape our attention. If anyone can doubt the healthy radiance bestowed by a commanding influence by the oil industry, let him gaze upon the wondrous history of Texas, _circa_ 1900 - ? Gaze, ye mighty, and despair…) [/QUOTE] My God! It’s almost as if they were dealing in something our society and economy considers an irreplaceable commodity. The bastards! How dare they! ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [April 17, 2008, 7:18am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/166 "2008-04-17T07:18:54Z")
Cartman? Is that you? ---
**Author:** ![Starving\_Artist](https://avatars.discourse-cdn.com/v4/letter/s/aeb1de/32.png) [@Starving\_Artist](https://boards.straightdope.com/u/Starving_Artist)\ **Post date:** [April 17, 2008, 7:27am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/167 "2008-04-17T07:27:02Z")
[Cartman] Hell, no! That was Kyle, you dumbass pig fucker! [/Cartman] ---
**Author:** ![Jinx](https://avatars.discourse-cdn.com/v4/letter/j/c6cbf5/32.png) [@Jinx](https://boards.straightdope.com/u/Jinx)\ **Post date:** [April 17, 2008, 7:30am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/168 "2008-04-17T07:30:22Z")
Thanks for defending the highway robbers. When they come to take the food out of your mouth, be sure to keep smiling, now! 😃 The price of oil is a joke, and the laugh’s on us. Now, I understand what Steely Dan meant about a Royal Scam. Why should Atlanta scream of drought on a planet 3/4 water? Mankind is a joke. ---
**Author:** ![Jinx](https://avatars.discourse-cdn.com/v4/letter/j/c6cbf5/32.png) [@Jinx](https://boards.straightdope.com/u/Jinx)\ **Post date:** [April 17, 2008, 7:38am UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/169 "2008-04-17T07:38:38Z")
I’d like to ask the OP…does s/he support Enron’s actions, too? They were only fooling themselves, right? 😉 ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [April 17, 2008, 3:04pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/170 "2008-04-17T15:04:01Z")
[QUOTE=Richard Parker] Heh. I have no idea. If I had to hazard a guess, I’d say the same number that support a minimum wage. A distinct minority to be sure, but they make arguments from within their discipline that merit sober consideration–or at least something more than a dismissive insult. [/quote] Maybe. But economists are human, too, and are subject to human emotions. See below for further comments. > [@](#): > > That’s an unfair analogy. The windfall tax is by definition a temporary tax, revived from time to time based on windfalls. The fact that it existed the last time we faced this scenario creates a likelihood of its revival quite above the likelihood of seeing 90% income taxes any time soon. How often is “from time to time”. I only remember once. > [@](#): > > Explain that to me. A windfall tax places profits gained as a result of the windfall (some margin Congress deems to be the windfall margin) at risk. This makes the companies less profitable, true, but they remain an incredibly good investment and will _still_ be taking in absolute profits well in excess of any other industry. What activity is reduced? How do you know they remain an incredibly good investment? You’re assuming that after the “windfall” is gone, that things return to the point they were before hand. No one knows if that is going to be true or not. All companies operate on the principle that bad times will come at some point. This just means that with the bad times, the good times will be less good. > [@](#): > > I’m operating under an assumption that whatever it is you tax, you marginally discourage. I’d rather marginally discourage reaping the benefits of luck than marginally discourage labor or innovation. But why? Isn’t a sense that profits earned from what you consider to be “luck” are someone unfair? And isn’t that born out of a sense of resentment? Economists can sometimes have a political agenda as well, trying to enforce some sense of social fairness along with understanding how the economy actually works. And how is it, exactly, do you determine what is “luck” and what is prudent investment in the future? If AMD stumbles, Intel’s profits go up through no actions of its own (except being ready to take advantage of that stumble). And vice versa is true (actually, even more so for AMD since it is smaller and gets a bigger relative boost). Should that be subject to a windfall profits tax? Seems to me this whole “luck” thing is entirely subjective. Remember, profits aren’t locked away in vault to be admired by greedy capitalists as the use $100 bills to light their cigars. They are pumped back into the business to make it grow. ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [April 17, 2008, 3:23pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/171 "2008-04-17T15:23:05Z")
[QUOTE=John Mace] Maybe. But economists are human, too, and are subject to human emotions. [/quote] True. No man is a computer. But since that applies equally well to both sides of the argument, I fail to see the import. > [@John Mace](#): > > How often is “from time to time”. I only remember once. I was talking about the very nature of a windfall tax. It comes about and then is taken off when the windfall ends. > [@John Mace](#): > > How do you know they remain an incredibly good investment? You’re assuming that after the “windfall” is gone, that things return to the point they were before hand. No one knows if that is going to be true or not. All companies operate on the principle that bad times will come at some point. This just means that with the bad times, the good times will be less good. I meant that the tax itself cannot make them a bad investment. The tax is calibrated to the profit level they were making before whatever Congress defines as the windfall. At that time they were a good investment. If the market should change such that there is no longer a windfall, the tax goes away. The company is exactly as vulnerable to downturn as it was before the windfall–which is to say, not very. > [@John Mace](#): > > But why? Isn’t a sense that profits earned from what you consider to be “luck” are someone unfair? And isn’t that born out of a sense of resentment? Economists can sometimes have a political agenda as well, trying to enforce some sense of social fairness along with understanding how the economy actually works. Economists generally leave decisions about fairness to the politicians, preferring to discuss that which is quantifiable. In this case, what is quantifiable is the expected revenue of the tax and the expected impact on the oil companies. It is up to us to consider whether that is fair. And the argument I am making for its fairness is based on principles, not envy. It isn’t a bright line, but the principle is clear, whether you agree or not, or whether we call it luck or not. We all agree that the record profits–and we’re talking about the highest profits in the history of the United States–are not the result of Exxon’s hard work or innovation. At best, they are the result of Exxon’s “prudent investment,” by which we mean their mere presence in the market. We can distinguish that kind of profit, in principle and absent emotion, from profit earned as a result of decisions made by an individual or firm. I think a company benefitting from the failure of another company sometimes reflects the company’s good management when faced with the same market pressures as the other company and sometimes not. Not every instance of luck is a windfall. There is a difference of degree. And no one advocates that we tax all that falls into our definition of windfall. What they advocate is that taxing windfalls in extreme scenarios is sometimes a good idea. And that this is one such extreme. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [April 17, 2008, 3:42pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/172 "2008-04-17T15:42:03Z")
[QUOTE=Richard Parker] I meant that the tax itself cannot make them a bad investment. The tax is calibrated to the profit level they were making before whatever Congress defines as the windfall. At that time they were a good investment. If the market should change such that there is no longer a windfall, the tax goes away. The company is exactly as vulnerable to downturn as it was before the windfall–which is to say, not very. [/QUOTE] I’m only going to address this part because I think it is the key flaw in your argument. Companies like oil companies count on these “windfalls” in their planning. They use the extra cash to make investments that make them more profitable during downturns. If you take that away, they are not just as good an investment as they were before hand unless they act differently beforehand to make sure they have to capital available during those downturns. The only way they can do that is to either raise prices or lower future investments. Now, they could also look for efficiencies, but they can do that without the tax, too. Also, we can only tax US corporations. What this sort of thing does is to drive the activity you are taxing out of the country, or give an advantage to those companies which already operate outside the country. But the key is you cannot expect a company to lower its pricing if you increase the taxes. The premise of this thread is that some people think gas prices are high because oil companies are “price gouging”. So, if that’s the problem we’re trying to address, then doing something that would raise the price of gas I can’t see how that can be considered a solution. Anyway, maybe we should take this debate to GD where we’d get participation from a wider audience. It’s an interesting subject and one that might very well be an important issue in the general election. Let me think about crafting an OP. ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [April 17, 2008, 3:52pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/173 "2008-04-17T15:52:24Z")
[QUOTE=John Mace] Anyway, maybe we should take this debate to GD where we’d get participation from a wider audience. It’s an interesting subject and one that might very well be an important issue in the general election. Let me think about crafting an OP. [/QUOTE] Fair enough. Hopefully we can actually get a forceful advocate of windfall taxes to play my part. Ideally a devilishly handsome Milton Friedman meets Robert Reich type. ---
**Author:** ![John\_Mace](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/john_mace/32/185_2.png) [@John\_Mace](https://boards.straightdope.com/u/John_Mace)\ **Post date:** [April 17, 2008, 4:13pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/174 "2008-04-17T16:13:43Z")
I’m not sure Reich can be considered an economist, although he does play one on TV. He has a law degree (Yale, with Bill Clinton) and although he has written popular books that touch on economics, does he have a record of publishing peer review economic articles? ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [April 17, 2008, 4:22pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/175 "2008-04-17T16:22:10Z")
His name is on a few works of academic economics, but I imagine as the policy member of the research team. I didn’t mean to apply with my above joke that he is an economist by training. ---
**Author:** ![Weirddave](https://avatars.discourse-cdn.com/v4/letter/w/919ad9/32.png) [@Weirddave](https://boards.straightdope.com/u/Weirddave)\ **Post date:** [April 17, 2008, 5:24pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/176 "2008-04-17T17:24:46Z")
Can I ask a question about something basic that I’m just not understanding? What is the purported purpose of a windfall tax? Because it just doesn’t make any sense to me unless that purpose is to punish successful businesses; “You made a lot of money so it’s OK for us to fuck you for every dime we can”. ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [April 17, 2008, 5:31pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/177 "2008-04-17T17:31:03Z")
[QUOTE=Weirddave] Can I ask a question about something basic that I’m just not understanding? What is the purported purpose of a windfall tax? Because it just doesn’t make any sense to me unless that purpose is to punish successful businesses; “You made a lot of money so it’s OK for us to fuck you for every dime we can”. [/QUOTE] The purpose is to raise revenue to cover our massive deficit–a deficit we’ve accumulated paying for one of the causes of oil company profit. The question is whether this tax is preferable to some other tax. ---
**Author:** ![Weirddave](https://avatars.discourse-cdn.com/v4/letter/w/919ad9/32.png) [@Weirddave](https://boards.straightdope.com/u/Weirddave)\ **Post date:** [April 17, 2008, 5:45pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/178 "2008-04-17T17:45:58Z")
[QUOTE=Richard Parker] The purpose is to raise revenue to cover our massive deficit–a deficit we’ve accumulated paying for one of the causes of oil company profit. The question is whether this tax is preferable to some other tax. [/QUOTE] OK, thanks for clearing that up. It is just a money grab then. I understand that, I was afraid there was some deeper supposed meaning that I was missing. In that case, I oppose any type of windfall tax, it’s nothing more than legalized theft. You want to cut the deficit? Cut spending. Don’t tax success. ---
**Author:** ![Richard\_Parker](https://avatars.discourse-cdn.com/v4/letter/r/35a633/32.png) [@Richard\_Parker](https://boards.straightdope.com/u/Richard_Parker)\ **Post date:** [April 17, 2008, 5:47pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/179 "2008-04-17T17:47:00Z")
[QUOTE=Weirddave] OK, thanks for clearing that up. It is just a money grab then. I understand that, I was afraid there was some deeper supposed meaning that I was missing. In that case, I oppose any type of windfall tax, it’s nothing more than legalized theft. You want to cut the deficit? Cut spending. Don’t tax success. [/QUOTE] Invent a time machine and then we can follow your plan. ---
**Author:** ![NDP](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/ndp/32/55_2.png) [@NDP](https://boards.straightdope.com/u/NDP)\ **Post date:** [April 17, 2008, 6:03pm UTC](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412/180 "2008-04-17T18:03:11Z")
[QUOTE=Weirddave] In that case, I oppose any type of windfall tax, it’s nothing more than legalized theft. You want to cut the deficit? Cut spending. Don’t tax success. [/QUOTE] At the risk of drifting off-topic, that’s easier said than done. Just where do you propose we cut spending? I know you could say we should eliminate all the ear marks and other “pork” projects but even after doing that, you’ll still have a large deficit. Perhaps the Bush Administration and the Republicans who were running Congress at time should’ve thought about this when they cut taxes during a time of war but it’s obvious they didn’t think their cunning plan all the way through. [Previous page](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412.md?page=8) [Next page](https://boards.straightdope.com/t/anybody-who-says-that-the-oil-companies-price-gouge-are-pinheads/445412.md?page=10)