Oil company hearings disgrace
by The Panda Man · 11/09/2005 3:52 pmReady for some pandering? Oil company executives appeared before a Senate committee exploring the “excessive profits” taken in by those companies in recent months. The resulting bi-partisan “big oil”-bashing orgy produced little of value.
Democrats resorted to the usual “evil corporation” rhetoric.
Sen. Barbara Boxer, D-Calif., made the issue personal, noting that the executives were reaping multimillion-dollar bonuses on top of multimillion-dollar salaries as "working people struggle" to pay for gasoline and face the specter of soaring home heating bills this winter. "Your sacrifice appears to be nothing," Boxer told the executives.
Unfortunately, there is no shortage of stupidity from both sides of the aisle in this story. Some examples:
Both Republicans and Democrats have urged the companies to use more of their profits to build refineries and other energy projects.
A number of Democrats, joined by a few Republicans, have called for a windfall profits tax on oil companies.
The White House said that President Bush, too, is concerned about energy prices. "Energy prices have been too high and energy companies have realized significant increases in profits," said spokesman Scott McClellan. "It’s important that the private sector be good corporate citizens and invest in the energy infrastructure and support those who are in need."
This is nothing but political boilerplate calculated to show the public that Congress is “doing something” about high gasoline prices. The oil executives defended their businesses, but of course this talk fell on deaf ears. One expects Democrats to trash companies over “excessive profits” but to have Republicans and even the President join in is disappointing. Thankfully, there was one lone voice of reason included in the story.
The head of the National Association of Manufacturers, former Michigan Gov. John Engler, criticized lawmakers for the way they handled the hearing. "Demagoguery and demonization will not reduce energy prices or solve supply problems in the long run," he said. "Our energy supply and infrastructure have suffered from 25 years of increasingly restrictive government policies that have made it almost impossible to access and refine the resources we have. The Senate should dispense with the theatrics and get serious about Americas energy supply."
Thank you, Mr. Engler. Is anyone in Washington listening?
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What a coincidence that the one lone voice of reason in this comes from someone who is not now a politician engaged in pandering. Hmmm, like Dana Carvey would have said, how convenient. Here’s some good stuff from Engler:
http://www.nam.org/s_nam/doc1.asp?CID=202003&DID=235515
Another good one from Engler:
http://www.nam.org/s_nam/doc1.asp?CID=202003&DID=235622
I’m glad there are some people out there who get it.
I saw this guy speak in Arlington the last week in October. Very impressive. He said the same things there. Mike Martin, he was a politician. I guess all the good ones quit while they’re ahead!
The pessimist in me wants to agree with that, the optimist wants to say that not enough credit is given to the good ones that are there. Politics must be a frustrating profession.
Amen
The bottom line is Big Oil could have sold gas for $1.50 a gallon and still made reasonable profit. But they sold it for $3.00 a gallon because they could. We have no alternative but to fill our tanks with gas.
I will dance on the graves of Big Oil when an alternative fuel is found and they go the way of the horse and buggy. I am conservative as the day is long but I know they were screwing us daily without the benefit of lubricants. To them we were their prison cell mates.
The free market model only works when there is competition in the marketplace for that product. When these anal openings set the price and then look out the window and make the pump price the same as the other station that smacks of collusion.
Somebody needs to remind the politicians that corporations don’t pay taxes, consumers do. The corporation may write the check, but where do you suppose they got that money?
Ever a good source for a crash course in Economics-101, here’s Walter Williams.
http://www.townhall.com/opinion/columns/walterwilliams/2005/11/09/174865.html
>>
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. According to the American Petroleum Institute, over the last 10 years, it has cost the oil industry $47 billion to comply with costly and sometimes useless environmental controls.
The issue here is, or at least should be, how will the oil companies spend their multibillion dollar tax breaks. If they are going to reinvest it into building refineries or alternative fuels good. If not, they need to get called out on it.
When I woke up this morning, there were quite a few more than 1 oil company in the world. Has something changed while I wasn’t looking?
#7: You nailed it, Ken. In some cases, these environmental controls are worse than useless. Remember MTBE? The feds mandated the stuff, so oil companies use it. Then we find out this stuff makes a beeline for the water table, and the oil companies are on the hook for the lawsuits.
Mike,
when they all set a price and all sell at that price how can you call that competition? When the Exxon, Shell and Shamrock on the same corner all have the same price that is collusion. If that oil all came from different places how can it cost the same? Somebody artificially set the price.
When you go to the grocery and go down the beverage isle each company has a price for soda. You get to choose the one that is the best price or on sale. Choice my man,choice.If Mr. Coke called up Mr. Pepsi and agreed on a price to sell soda they would be put in jail for collusion. Why should BO be exempt from that?
If the Dow is up the economy is booming and everything is great. But let the oil companies make a nickel and Bush is Hitler in Halliburton’s pocket. Yeah, we are forced to buy that gasoline. How would we get to Denny’s for our $7 cheeseburgers otherwise? No bloody choice. Give me a break.
One more thing, this straw man argument about the refineries is BS. They could build a refinery tomorrow 10 feet across the Mexican border and make it with duct tape. Just give Vince Fox a lifetime supply of tamales and its a done deal. Same with any other country even the US with the right Senator in the pocket. They dont because they sell their poison to us lemmings for whatever they want and their partners at Big Auto keep cranking out the 300 hp 1500lb Hummers that get 9 mpg. Why build a gazillion dollar refinery and lower the price of gas? Thats stupid.
Gregg,
I’ve personally seen situations where one Shell station had a price that was $0.20 higher than another Shell station two blocks away from it. That doesn’t even touch competition between brands. While you are correct in that there is a pricing structure:
http://www.opisnet.com/
you are incorrect in assuming that there is no competition amongst rack providers to set that structure to some lowest possible value. These people like their money just as much as you do, and if they could make more of it by taking someone else’s business, it would happen.
Your grocery store example is a perfect one to prove my point about supply and demand, but not with soft drinks. Remember not too long ago when there was a shortage of tomatoes? If I’m remebering correctly, tomatoes were over $2.00/lb and Jack in the Box quit giving them to you on their hamburgers.
The reason you get to choose a low “on-sale” price for sodas is that there is simply no big challenge or shortage involved in making soda. There are no tax hurdles for soda makers nor environmental regulations making their production more difficult.
There are other drilling companies in the world besides the biggies that you typically think of. Here’s a good listing:
http://www.rigzone.com/search/alpha/a/
With all of the companies that you see on there, don’t you think that if big oil was truly screwing us to the extent you say that they are, that at least some of those smaller outfits would begin selling crude at a lower price to refineries to undercut the big boys?
You like to talk about Walmart alot, and how they undercut everyone else. Why has Walmart done that? Because they can. They are the big boys and they can do it cheaper, faster, and more efficiently. No different than oil companies, except that Walmart isn’t fighting the EPA at every turn. Anywhere that a company can undercut the competition and still make a profit, it will eventually happen.
So you cite choice… well you do have a choice. You just don’t like your options. There are many other countries in the world where you would like the prices even less, but that’s another conversation.
“This is nothing but political boilerplate calculated to show the public that Congress is “doing something” about high gasoline prices.”
Jeremy, I hope you are right that this bipartisan hissyfit is just political boiler plate. But I fear they might actually do something lame like pass price controls or “windfall” profits taxes on oil companies. In those cases, we would have a bigger energy problem.
#13. “Big Auto keeps cranking out the 300 hp 1500lb Hummers that get 9 mpg.” They keep making them because people want them. I just got a real good deal on a Tahoe because of the knee-jerk reaction to high oil prices. I will not drive a Briggs and straton powered Honda. If you factor in inflation, gas is not much higher now than in 1960. BTW the Hummer H1 has 300 HP and weighs 7847 Lbs.
Go to http://www.westegg.com/inflation/infl.cgi for the Inflation Calculator. I remember when my Dad complained about gas going to thirty cents a gallon, I was in first grade (1960), using those numbers gas should be $1.90 a gallon. It will be back below $2.00 in a few months.
The oil crude price and gasoline price at the whole sale level is set by traders on the Chicago Board of Trade. The price at the pump is set by a government formula which requires the delivery price and shipi0ng cost for delivery which equals the price allowed at the pump. Bottom line is that if there is gouging it is real easy to find and know what the difference is between the legally allowed price by the government formula and the sales price if there is a difference then gouging has occured and a fine is or can be leveed.
As far as Exxon, Shell, Chevron setting the price of a barrel of crude that is an idiotic joke by people with too small a brain capacity for sound thinking. The reason OPEC lost its ability to set prices in 1973 was because of the traders in Rotterdam, Netherlands. The reason there was a shortage in the states was because the government i. e. stupid politician trying to decide where the oil needs to be sent. The oil wound up at refineries without capacity while other went starving for lack of shipments. I remember the price of gasoline going from $0.25/gallon to $0.75/gallon in 6 weeks in the summer of 1973. The state and federal government make $0.69/gallon while the oil companies return off a gallon of gasoline is 7%, so 7% times $2.50/ gallon is $0.175/gallon. So who makes more profit from a gallon of gasoline? Why was the speed limit increase from 55 MPH to 70 MPH - seeing as how you 15% more gasoline - the government needed more income.
#17 Oops! it should be http://www.westegg.com/inflation/ sorry.
I don’t give a damn who set what or did this or that. Big oil cut [this year] production, increased imports and increased their quarterly profits by 89% over the same period for 2004. China’s oil imports have actually been reduced so that argument is bogus. There was no oil imbargo or any other market reason for the increases - prior to the hurricanes. They control the supply they control the demand, they control the market. They are profiteering at the expense of the consumer. I’m sure they would salivate at the idea that there is support for their extreme profits.
Then on what do you base your argument, other than the fact that you’re pissed off about having to pay more for fuel and oil companies making a profit? This is not an area where you can argue the merits of your case with emotion and unfounded opinion, as politicians are doing right now.
I do not support any gov action against Big Oil and Big anything. Just stop subsidizing them at our expense and then raping us on the final product. I bet the CEO of Exxon has a multi million dollar yacht that is somehow titled in a way to get it as a tax write off. Its legal but is it right?
BTW in 1960 it cost $4.50 to fill a 15 gallon tank. This summer it cost $45.00. Adjusted for inflation my rectum.
It seems the only people who still defend these theives have oil stocks or work in the industry. You are nothing but Oil Whores.
My spelling is fine on my side. When it gets posted someone must be changing it.Hey, I went to HISD,what did you expect? He He.
Nobody gave a damn when oil companies were loosing their ass. I saw companies killed by cheap oil.
So many lost their jobs. So many are gone forever. Windfall profits? Oil companies do not set the price for their own products. Unrealistic regulatory compliance makes many new projects impossible. I know. Regulatory consulting is my livelyhood. Ladies and gentlemen, the government IS the roadblock. One day, OIL (the industry) will lock down because of government…why? Because they want to please the ignorant. Because THEY are ignorant. Because most of the citizens of the US are ignorant about their energy sources and how that energy is aquired. Take the oil money by Winfall Profits Tax and you take away the future investments in the US. All oil producers are not BIG oil. Most US production is by Independents. Take their money and loose your energy. Go ahead and do it. If we allow this, we get what we deserve. No energy, no fun.
I may be a whore, but I’m not a cheap one John, so save your pennies if you want to indulge.
#24 Ladies and gentlemen, the government IS the roadblock. AMEN!!!
An HISD graduate that explains it all as I can see how my tax dollars are being wasted. It is very obvious that the taxpayer’s didn’t get their money worth during your educational process - all the more reason for spending and appraisal caps for government programs.
#21. Dept of energy web site.
#28 Observer,
From the DOE site:
Federal, State, and local taxes are a large component of the retail price of gasoline. Taxes (not including county and local taxes) account for approximately 27 percent of the cost of a gallon of gasoline. Within this national average, Federal excise taxes are 18.4 cents per gallon and State excise taxes average about 21 cents per gallon. 2 Also, eleven States levy additional State sales and other taxes, some of which are applied to the Federal and State excise taxes. Additional local county and city taxes can have a significant impact on the price of gasoline.
Refining costs and profits comprise about 15% of the retail price of gasoline. This component varies from region to region due to the different formulations required in different parts of the country.
So we see that taxes account for nearly double the percentage of the cost of fuel as the actual refining does. I fail to see this as an indictment of so-called “big oil”, it’s more damning of “big government” in my opinion. That primer was apparently written in 2004, as they are comparing 2002 and 2003 price per gallon breakdowns in an earlier section.
In the “this week” section there is this:
U.S. Retail Gasoline and On-Highway Diesel Prices Continue to Drop
The U.S. average retail price for regular gasoline dropped by 10.4 cents to 237.6 cents per gallon, falling for the fifth week in a row. Over the past five weeks, retail prices have dropped a total of 55.2 cents per gallon. Nevertheless, this week’s price is 37.5 cents higher than this time last year. Prices were down throughout the country, with the Rocky Mountain region seeing the largest regional decrease of 12.2 cents to 246.4 cents per gallon. The Midwest had the lowest regional price in the country, falling 9.5 cents to 223.1 cents per gallon. East Coast prices fell by 10.9 cents to 239.6 cents per gallon. The West Coast averaged 262.3 cents per gallon, the highest regional average price in the country, after falling 8.9 cents; California prices lost 8.8 cents to 265.9 cents per gallon.
Retail diesel fuel prices tumbled 17.8 cents to reach 269.8 cents per gallon, the lowest price since August 29, 2005. Over the last two weeks, the U.S. average retail diesel price has plummeted 45.9 cents per gallon, the largest two-week decline on record. Prices were down throughout the country last week, with the Midwest seeing the largest regional decrease of 23.6 cents to 267.1 cents per gallon. The highest regional average price in the country was in the Rocky Mountain region, falling 17.2 cents to average 290.7 cents per gallon. East Coast prices were down 12.7 cents to 265.7 cents per gallon, the lowest regional price in the nation. West Coast prices averaged 282.1 cents per gallon, a decrease of 13.0 cents.
If “big oil” is profiteering, why the current price drop? Did they suddenly decide to drop prices in a sudden fit of morality, or are normal market forces at work here?
Maybe we’re looking at different sources. Here’s where I got the above information:
http://www.energy.gov/engine/content.do
My bad… in the above post I forgot to close my italics tag after the paragraph ending in “13.0 cents”. The words thereafter are mine and not the DOE’s.
Neil Cavuto at Foxnews presents his excellent (as usual) take on this situation:
http://www.foxnews.com/story/0,2933,175226,00.html