Posted by
Travis on Tuesday, December 26, 2006 11:03:08 PM
We keep hearing about record oil company profits, so called windfall profits. The mainstream media and most of our politicians would like nothing better than to punish the oil companies for doing nothing more than filling a need at fair market prices.
Part of their reported profits are inventory profits, supplies bought at a lower cost sold during an up market. If I have a gallon of milk bought at $2.00 and it will cost me $3.00 to replace it I am not going to sell it for my usual $2.50, I will sell it for $3.75. My profit soared from $.50 to $1.75 on paper, untill I have to replace it, just like what happened to the oil companies.When I have to replace it my profit margin returns to what it was before, even though my $.75 profit is greater.
Now the Democrats are planning to hit BIG OIL with windfall profit taxes in disguise. To be sure that is not what you will see it called in most of the media but that is in fact what they are going to try to do.
They want to "roll back" tax breaks for the oil companies to fund research into renewable and alternative energy.
They want to try to collect "back royalties" from Gulf oil and gas leases because the government made a mistake in the original contracts.
They are considering trying to pass a new law against price gouging, never mind that despite all of the investigations into price gouging not one case has been found.
They are going to try to eliminate some tax breaks for refinery investment. Maybe it is just me but I thought we needed more refining capacity in the U.S.
One of the most appalling however is a move to raise tax on oil company inventories. A move that would cause oil companies to drastically reduce their inventories and to cause the price we pay to become highly volitale.
Economics 101: The consumer pays all taxes in America period. That would be you and I, not BIG OIL, BIG RETAIL, or any other business, it is the consumer. Any new tax that a company has to "pay" gets passed on to guess who...you and I, the consumer.
I wonder if any of the politicians will try to pass subsidies for the oil companies when their profits take a dip because they are selling more expensive inventory at a lower cost. I do not think I will hold my breath for that day.