The Oil Drum

34 comments on A proposal for the windfall profits

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nihilist on October 29, 2005 - 1:03am

Profits must be put in context relative to sales, and relative to investment as well. Making $10 profit on $40 of sales is one thing, and making $10 on $20 of sales is another.

Go ahead, compare profits to sales in the energy industry versus other industries. Relative to total sales, the energy industry DOES NOT make obscene profits. Furthermore, looking at the amount of investment required in the energy field, this level of profit is nothing spectacular.

I do not recall anyone suggesting that Microsoft's profit margin, or Coca Cola's profit margin, for example, were too high and should be subject to windfall profits taxes. How about Google? How about the sacrosanct tax free profit you get on the first $500k you made on the home you just sold? That one is really obscene.

The idea of windfall profits is a bad idea. Folks we need to get more investment in energy (and a whole lot of conservation). Anyone interested should look back at the price controls and WPT of the 1970s and see what the effect was then. It did not help.

WPT will have exactly the opposite effect of what we need.

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Dave Cohen on October 29, 2005 - 1:22am

You may be right, so how are we going to help people who need that help to pay their winter energy bills right now? Do these people matter or not?

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Dave Cohen on October 29, 2005 - 2:17am

Re: "[we need] more investment in energy"

Since I'm angry today that ExxonMobil just made a profit higher than the GDP of many third world (developing) countries, I'm going to continue here.

Beyond conservation, which is a good idea, what does more investment mean? The oil companies have already given up on most of that. There aren't any more promising prospective areas for new discoveries anymore. A lot of you folks here at TOD might pay attention to what I'm about to say. Bubba and, before him, the legendary J, industry insiders, have made this abundantly clear. So does all subsequent research. More investment does not translate into more discoveries and production. So, what could more investment mean? -- a list of suggestions below.

Invade Iraq? ANWR? A war with Iran? Drill a wildcat in my living room in Boulder, Colorado? Coal bed methane in the Western States? Oil Shales? Make Alberta, Canada the 51st state? Exploit the (diminishing) reserves in the Gulf of Mexico? Assassinate Hugo Chavez? Exploit the Wolverine field in Utah (less than 1 bbo)? Take a serious military interest in Azerbaijan, Khazakhstan and the entire Caspian region? Tell the Chinese to stop using so much oil? Screw the Indians? Bribe Putin? Disarm the Nigerian rebels? Use our Navy to patrol the Gulf of Guinea? Take over Saudi Arabia? or failing that, Kuwait, the UAE and Quatar? Pray? I think you get the idea.

Perhaps you might reconsider your idea of what "investment" is all about at this point.

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steverino on October 29, 2005 - 1:08pm

hey dave....i feel the same frustration that you do...but i also understand the reality of the situation...TODer's are an idealistic bunch...but the reality is that this country and most certainly it's administration are not of our mindset...so i would say everything on your list is within the scope of "action" for those bozos...heil bush!

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GreyZone on October 30, 2005 - 3:05am

Ha! Microsoft is a perfect example. The OS line was $12.2 billion and the profit (before taxes) was $9.4 billion. THe Microsoft Office line plus servers for office workers, etc., was $11 billion in revenue with $7.9 billion in profits (before taxes).

Want to talk about obscene? Call Bill Gates.