Windfalls and Hot Air
Oil Company Execs Defend Profits to Senate
“Oil executives sought to justify their huge profits under tough questioning Wednesday, but they found little sympathy from senators who said their constituents are suffering from high energy prices.
"Your sacrifice appears to be nothing," Sen. Barbara Boxer, D-Calif., told the executives, citing multimillion-dollar bonuses the officials are receiving amid soaring prices at gasoline pumps and predictions of more of the same for winter heating bills.
There is a "growing suspicion that oil companies are taking unfair advantage," said Sen. Pete Domenici, R-N.M. "The oil companies owe the American people an explanation."
The government is investigating ‘big oil’ for making money. Did they want companies to loose money? Or perhaps just break even?
It’s true that oil companies are making lots of money right now. That is because demand is high and supply is relatively low. When supply is higher and demand lower, they don’t make so much money. That’s the free market. The recent hurricanes in the gulf disrupted supply. Because demand remained roughly stable, the price should increase until consumers decide to decrease consumption to meet the level of supply. This is simple economics.
What angers me is not so much the public’s frustration with the oil companies (although if they really wanted to offset or even profit from the high price of oil, they could just purchase stock in ‘big oil’!) as Washington’s deceit in blaming ‘big oil’ for ripping off consumers. The truth of the matter is that it is ‘big government’ that has been gauging consumers for years, much more so that the oil companies. Government’s profits over the sale of gasoline have far exceeded corporate profits for the last thirty years. These are nothing compared with Europe. We currently pay around six dollars per gallon for gasoline in the United Kingdom. Oil company profits are more or less the same as in the States; the vast majority of the price difference goes to – you guessed it – government. And now, while complaining that high gas prices hurt consumers, politicians are simultaneously proposing a ‘windfall tax’ on ‘windfall profits’. Are they really out to protect consumers or to increase their own budgets?
There appear to have been illegal cases of price gauging in places such as Atlanta during Katrina which should be prosecuted. Any national investigation of gasoline prices, however, would be incomplete without an investigation of government’s price gauging. That means you, Sen. Boxer.