I just want to add that the costs of production have increased steadily just looking back over the company I work for our F&D costs have increased over 10% in the last year and it is expected to increase at a similar or greater rate in the near future. All service companies are raising their rates and not just those associated with higher fuel costs or an increased cost of living for their employees.
If it is assumed that oil companies are reaping a windfall profit are the service companies? As of this quarter Halliburton’s profits have increased 65%. Do they need to be charged a windfall tax? Assuming that you would say they need to be charged the tax as well what about the company that builds their trucks? I was at lunch with a small wireline company the other day and building a new wireline truck is costing them 3 million which he said was a large increase in price but also admitted would be charging us more for his services. I do not know how much money from that truck was profit for the manufacturer but if they also had 65% increase on a quarter do they deserve to be taxed, they are after all taking advantage of high oil prices.
Drawing a line for where it is a windfall tax and where it is just good business practices is impossible. Unless you’re just going by the dollars of profit in which case business are being punished for being successful and would simply create more independent oil companies who were below the taxable limit and not change anything.
But they’re not the same as every other company. If the price of beef doubles, the Butcher doesn’t get twice as much of a fee. If the price of Iron doubles, the Blacksmith doesn’t make twice as much. If the price of wheat doubles, the grinder doesn’t double their profit.
The Oil companies are doing the exact same work they were 5 years ago, why do they deserve so much more profit? “Because they can” isn’t a justification. Of course this is one of the things we have to deal with living in a capitalist country. But God damn, that doesn’t mean we can’t be pissed off about it.
All of it. The oil companies haven’t doubled their profits, they are profiting the same as always off a a vastly greater volume of business. We’ve been going over that for 2 whole pages and you have apparently missed all of it.
Where did you get the idea that corporations exist to “help us out”? They exist to maximize shareholder wealth. As others have alluded to, a 10-11% profit margin is not an unreasonable way to meet that goal.
The cases you used in your example are “value-added”. The blacksmith doesn’t mine, the miller doesn’t farm, and the butcher doesn’t herd. They take the resultant raw materials and make them into a product. The people that do the production of actual raw materials do quite well (assuming no substitutes exist, like with gasoline). Of course, there are exceptions to that. Take cars, for instance. How much, in dollars, of raw materials do you think they put into a car that sells for $30,000? There are lots of other things that go into the cost of production. Oil companies have the same issues, and they cut it a lot closer than, say, Toyota does. Oil companies make their money in sheer volume, not high margins.
Oh, and while we’re talking about Toyota, those damn price gougers have increased profits by 32% a while back(Cite). Let’s get 'em!
“Earn” and “deserve” are two different things. Emotion doesn’t mean anything to the bottom line, and your statement about “deserving” is an emotional argument. How you feel doesn’t change the essential realities of the situation.
http://www.ucsusa.org/clean_vehicles/fuel_economy/subsidizing-big-oil.html Oil companies get breaks from us from the top to the bottom. Tax breaks, subsidies,land deals etc. We give breaks to the biggest profit makers of all time. How can that make sense.?
Besides we give these subsidies to them ,when they should go to alternative energy sources.
They haven’t doubled their volume. They are doing (essentially) the exact same volume, and the exact same thing they would have if oil prices were half what they are. Assuming their 10% margin, they make 35 cents a gallon on $3.50 gas. and 17.5 cents on $1.75 gas. What are they doing to justify that extra profit? Jack diddly crap. They just fell ass backwards into more money.
It’s obvious that you have no intention of reading what I or others have said, so go mumble in the corner about how unfair it is and let the big people talk. Maybe gonzomax, another deep thinker, will keep you company.
As I mentioned before, they won’t have any incentive to sell more gas if they’re required to slash margins as prices go up. They’ll stop selling as much gas, and then (once again) guess what? Prices go up more because there’s less supply.
But that’s just as a practical matter. As others have said, why should oil companies face a unique requirement to “justify” how much profit they “deserve”, esp. when that profit margin is consistent with other companies of their size?
So it’s not unfair to call it a windfall profit or say that they are price gouging. They saw an opportunity to make a ton of money and they took it. That’s the way the game is played, but it sure doesn’t make them anything but bastard coated bastards.
OK, so tell me where I’m wrong. You have my full attention. Rather than ignoring the points made in this thread in favor of emotional outbursts, how about you use numbers and logic this time?
Well you agree that they fell ass backwards into more money. I don’t see any material difference between that and a windfall profit.
As for price gouging, well I guess that’s a matter of opinion. The oil companies used Katrina to jack up their profits, and they are using high oil prices to do the same. That counts as price gouging in my book.
That is 7.4% of their total revenue, 17.4% of their gross profit, and 41.5% of their operating income. If the tax code ever changes so that I’m only taxed on what I have left over after expenses, I’ll happily let you have well over 50% and I’ll still come out way ahead. That’s true for every fully employed person that I know. There are exceptions, mainly those who spend less than 35% or so of their income. I just don’t happen to know any of those people.
As for the rest of the OP, until we come up with a good definition for “price gouging” that we can all agree on, I have no clue if they are guilty of it or not, nor have I ever accused them of doing so. Where I do disagree with some defenders of “Exxon and friends” is with those who claim that they have “nominal profits” or low profit margins. While some industries have greater margins, many industries would kill for Exxon’s profit margins.
