Originally Posted by Boortz.com

First .. the big oil company tax benefits that our politicians remind us of virtually every day are tax breaks enjoyed by corporations across the board. So when the politicians cite those tax breaks as an excuse to tell the oil companies what to do with their profits they're laying the groundwork for a system in which politicians can dictate, to one or extent or another, how virtually all American businesses spend and invest their profits.

So there we were yesterday ... listening to these politicians, many of whom have never been responsible for delivering a profit in their entire lives, telling the oil companies what they should and should not do (translate into what they can and cannot do) with the money that they earn.

Now I blame those oil company executives too. They were submissive candy asses before that congressional inquisition yesterday. These politicians work for the stockholders and employees of these oil companies ... not the other way around. A little bit of spine in some of these highly-paid executives would have been a wonderful thing to watch yesterday. Instead --- they wimped out.

The political hacks made a big deal about the huge profits these oil companies made over the past few years. All of this posturing was a sham .. and the politicians knew it. They also knew that most of the people would watch them deliver their big oil smack down on TV wouldn't know a profit from a profit margin if their next six-pack and their big screen TVs depended on it.

So ... just a quick remedial course if you will.

Let's say you sell widgets. It costs you 92 cents to make a widget, and you sell the widget for a dollar. You make eight cents on the sale of that widget. Your profit is eight cents – your profit margin is 8%. Now, let's say that your cost of business, comprised mostly of raw materials, goes up. Now it costs you $1.84 to make a widget. You respond by raising the price of your widgets by a dollar. They now cost $2.00 each. Subtract your cost of doing business ($1.84) from sales revenues for one widget ($2.00) and you have a profit of 16 cents. Wow! Your profit has doubled! But wait! What is your profit margin? How much is your company making for every widget it sells? Nothing has changed. Your profit margin is still 8%. Profits have doubled .. the profit margin has remained the same. The only reason the profits doubled is that the price of your raw materials has gone up. Has anyone looked at the price of crude oil lately?

Last year the big five oil companies made around $123 billion in profits. Pretty strong. But what was their profit margin? Around 9%. Same as the year before and the year before that. The politicians can't pander to the dumb masses by slamming profit margins ... so they play the dishonest game of slamming the gross profits, and the media lets them skate. They start talking about "windfall" profits. Tell me ... how is it a windfall profit when the profit margin is remaining effectively the same? Some windfall.

Do you know why they get away with this nonsense? Because the dumb masses they're preaching to were largely educated in government schools. If you shoved what they know about economics up an ant's *** it would rattle around like a BB in a boxcar.

Some politicians, of course, want to take this situation with gas prices and figure out a way to turn it into another government entitlement program. They point out that some low-income Americans pay as much as 10% of their incomes for fuel. So .. what to do? Let's make some more suggestions as to how the oil companies should spend their profits. Two senators, Republican (INO) Olympia Snowe of Maine and Democrat Jack Reed of Rhode Island have asked the oil companies to voluntarily help "low income" consumers. They want the oil companies to contribute to a fund to help "low income" consumers pay for this upcoming winter's heating bills. Oh and to also pay for their transportation costs later this summer. The Senators complain that these big oil companies "need to share some of their profits with consumers who are in need." Since when it is the government's role to tell a private company that it needs to share its profits. It is not the govt's money. This money belongs to the teacher's union retirement funds, the police and fire fighter pension plans and other organizations and individuals who have purchased stock in these companies. Every dollar these politicians wrestle away from the oil companies is money out of the pockets of the shareholders .. or money the oil companies aren't going to invest in more energy production. But what the hell ... we all know that the govt can do a better job of spending this money anyway, can't it?

So there we were yesterday ... the non-productive political class telling these oil companies what they should and should not do with their profits .. profits that belong to the oil company stockholders.

Originally Posted by momalle1

It's rather ironic that Boortz claims the "dumb masses" fell for it, when everyone reading the article seems to think nothing has changed because the profit margin has remained the same. The fact is, the profits have doubled, so something has changed. The federal government taxes gasoline at 18.4 cents per gallon. A few years ago, that was roughly 10 percent. I bet if they raised it to 30 cents per gallon because the cost went up, no one, including Boortz would be defending the government.

The answer is demand, if we start buying less, the price will go down, plain and simple. The truth is, we've enjoyed cheap gas for a long time. As for building more refineries, the regulations on exploration and building have nothing to do with it, the oil companies simply don't want more refineries, they run at 98% or so now, and that's pretty efficient, why would you want to build more refineries when you can already keep up with demand? That would be less efficient.

Originally Posted by bluejay432000

The problem with what you say is that the few refineries that exist are owned by a very limited number of entities. A very limited number of individuals control what is produced. They can create shortages very easily. I saw it done. It is very easy for 12 to 15 people to control prices. Whether we like it or not, petroleum products and that includes plastics and everything that has petroleum in it, have become a necessity similar to food. What if you had such a small group controlling food? If the restraints on free competion were removed from the oil and gas industry, I gaurantee that others would see a benefit of building more refineries and compete for our dollars, thus driving the price down.

Originally Posted by signmaster

The government should stay out of it in almost all cases. They have to make a profit margin to survive. If it was gouging us as bad as some think, none of us would be driving trucks.

Considering all the mass research, production, distribution, and huge amounts of money it takes to run a big oil company, that profit margin is crap. If anything they are being generous.



And Bluejay, in my opinion there is just as much a monopoly on many things, including food. Some food companies are giants as compared to oil companies, and they can buy or sell at loss to remove any competition from small start up places. And I say that with my wife working for a company that brokers for Unilever, and I contract to Nestle US.

Both are similar situations. You could bake your own bread, make meals from scratch, etc or buy the quick easy stuff that costs more. Being this is a truck site, most of not all of us drive vehicles that consume a lot of fuel, but that was our choice, not something forced upon us.