Obama Pledges Imposing "Oil Windfall Profits Tax" -- Right Message, Wrong Language
Democratic presidential candidate Barack Obama sought to tap into Americans' anxiety over high gasoline prices by pledging to seek a windfall profits tax on U.S. oil companies if elected.
"I'll make oil companies like Exxon pay a tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills," the Illinois senator said on Monday according to Reuters.
On Tuesday, the big oil companies with the help of Senate Republicans showed the nation who's boss. The Senate slapped aside an energy package that would have imposed a 25% tax on unreasonable profits on the five largest oil companies who squeezed a staggering $36 billion profit out of consumers pockets this first quarter, it would have given government the leeway to address oil market speculation, opened the way for antitrust actions against the OPEC oil cartel (the forever oil lobby and administration stymied NOPEC legislation) and made energy price gouging a federal crime.
In doing so, Congress has once again shown how out of touch it is with the feelings and desires of its constituents for forceful action. And once again this administration, together with the oil lobby, has been the cheerleader for the vested and powerful interests of the oil industry.
Perhaps one word could change this, making opposition to the remedial steps proposed seem so self-serving that even the oil industry's most ardent supporters in our government and administration would be shamed into being supportive. Instead of calling it a "Windfall Profits Tax," calling it simply, correctly and informatively, a "Cartel Profits Tax."
Because in essence, that is what it is. It is a price for oil and in turn gasoline, determined by the collusionary and anti-competitive actions of the Organization of Petroleum Exporting Countries (OPEC) who are willfully withholding significant quantities of oil production from the world market in order to artificially raise the price of crude oil. Their actions contravene American law and the precepts of the World Trade Organization (WTO). Yet, because of sovereign immunity they are able to sidestep our courts and our laws. This, while their actions have a powerful impact on the price of oil and the profits made by oil companies. The same oil companies who continually talk to us about prices and profit margins being a reflection of the market's free hand of "supply and demand," knowing full well that the hand of supply is a grotesque and adulterated grip of OPEC manipulation.
It is OPEC's collusion that is a primary cause of oil's price escalation. Our oil companies are piggybacking on OPEC's actions to ever higher profits, profits unearned in a competitive free market sense, but profits that are simply the fallout of a cartel's supply and price manipulation. The question needs be asked, since we are paying the end price at the pump and the heating oil tank, do those artificially created oil profits really belong to the oil companies or the nation as a whole?
The oil companies, unlike industries that create products that broaden the landscape and enhance lives, are simply bystanders adding little or nothing to their product line or the general welfare. They are merely the toll collectors for ever higher cartel induced oil prices. One could even suggest their function, given the misinformation they propagandize on so many aspects of the oil market hoping to anesthetize our reaction to the choke hold of the industry and its OPEC brethren on our pocketbooks, and our national security that their contribution to the nation's well being is far more negative than generally understood.
Calling it a Cartel profits Tax would not only draw the lines more clearly and accurately, but begin to make Americans understand what this oil game is all about. And at the risk of being banal, "knowledge is power."
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How about this for an idea. Take this "Cartel /Tax" money and subsidize the trucking industry in an equitable manner, relative to the large trucking companies and the independent truckers. Doing this would have an across the board affect on prices, one would hope.
As an aside. I heard it said recently, by some yahoo, that legislation should be passed requiring people to monitor their tire pressure and fine them if remiss. What a boneheaded idea. How about instead requiring gas stations to have air pumps, supplied by the big oil companies, that don't cost $.75 for
2 mins of low pressure air.
Changing the name to Cartel profits tax does not change the fact that if the profits are taxed, the end consumer will be paying higher prices at the pump as the oil companies raise prices to account for the extra tax. This windfall profits strategy was tried before and the result was less fuel and higher prices. The real problem is government. Congress won't allow us to drill for and use our own oil and the Fed won't support a stronger dollar strategy. A weak dollar accounts for 30% of the recent increases, another 30% is due to the insane policy of not drilling in our own territory, 20% is due to speculators who are trying to protect their investments in a world of the cheap dollar (a strong dollar would lessen this commodity speculation not only in fuel, but foodstuffs), and 20% is due to the practices of the cartel. All three need to be addressed. Congress is filed with pandering morons - and in unison their approval rating is lower than President Bush who so many people think is a fool or worse.
The Democrats are as complicit as the Republicans in these oil prices. They knew full well that any windfall-cartel profits tax, that would be passed onto consumers, would be shot down by the Republicans. They should not have included everything in one bill, they should have tried to pass the speculation caps first and then moved on to the next issue. The oil industry has a profit margin of 10%. Does that mean that we need to tax any corporation that makes more than a 10% profit?
Here lies the problems!!!!
Exxon says and I agree the market should be $55.00 a barrel.
HEDGE FINDS ARE DRIVING UP THE COST OF OIL FURTURES!!!!!!!!!
How can you pentalize the oil companies for something BIG MONEY HEDGE FUNDS ARE CAUSING??
I would have more sympathy for Exxon if they didn't fund "scientists" whose specific duty was to argue against global warming, and the need to get off of oil.
I would also have more sympathy for them if they didn't spend 10s of millions of dollars on Congressmen and Presidents, ensuring that the billion dollar tax loopholes and subsidies that were passed early in the Republican presidency are not removed.
Maybe if the Exxon CEO hadn't paid himself almost 1/2 billion dollars in just one year, while underfunding the workers' pensions, the company would get more respect.
And finally, if Exxon were not the most "profitable" corporation in the history of the planet. Is it just a coincidence that when a company is allowed to become as dominant in their field as Exxon is, that they can pretty much decide in advance how much profit they want to make?
It's really frustrating to see how many Americans educated people just don't get it apparently including Obama and our author here..
First believe me if a Windfall Profits Tax would work I would be the first to favor it but it won't work..
Another thing try and remember this for the 500th time the American oil Companies ARE 49% of OPEC...!
They don't just piggie back OPEC they are OPEC...Jeeze Louise..!
The Vice President of Exxon Mobil himself said oil should be trading selling at $50-55 per barrel Tops..!
The problem and cuase for these increases is the Enron Loophole and the Speculators and Hedge funds and investment houses especially Goldman Sachs and Morgan Stanley here in America and the Traders in places like the London Market many of these former Enron traders even who did this same crap to California..with electricity they the ones that didn't go to jail were trading and gobbled up by these hedges funds and Investment banks like pitchers from Costa Rica..
What's with Obama doesn't he watch any of the Senate Committee hearings isn't he a member of the Senate will he be watching when Lukken appears this week the current Director of the CFTC..
Suppose I told you my brother was VP in charge of energy for one of the bigger Hedge Funds, then would you all listen to me, or for God's sake just listen to Michael Greenberger..
I think Obama knows and that this is just bad politics. I think this because of what he had to say about McCain's and Hillary's proposals to roll-back the taxes at the gas pump. If he understands that the gas companies would just increase the price of a gallon of gasoline up to the price prior to the tax holiday, then he certainly understands that a windfall-cartel profits tax would be passed onto the consumer. It's an inconsistency that I would like to have Obama explain.
"Congress has once again shown how out of touch it is with the feelings and desires of its constituents for forceful action".
Congress is not out of touch. It doesn't give a fu*k about the "feelings and desires" or voters. The November election will help by removing the Republicans from the equation. The way to deal with the arrogance of the oil companies is to nationalize them. Then ALL OF THEIR PROFITS will belong to us.
Some states do already have a limited version of nationalized oil. Alaska for one, I think also Texas. In Alaska, every citizen in the state gets a check for their portion of the oil profits taken from the state. I think Texas uses the oil profits to keep from having a state tax. It was ok in those states - why? How? If we can answer those questions, maybe we can figure out how to give every citizen a stake in oil. Maybe that's what it would take to open up more areas to drilling. Oil companies tell us, "trust us", "we won't damage the environment". Like we are going to believe them after Exxon-Valdez.
What a great idea..........Lets impose yet another tax on companies that already pay out 40% to the government. Except this time we will tax them if we feel they have made "too much profit".
I'm sure this kind of tax won't be passed on to the consumer. And if it is, we will simply get the government to step in and stop that too.
Who needs capitalism anyway?
Instead, maybe we should allow our oil companies to extract our own oil so we can tell OPEC to go to hell.......Or is that too simple??
It's not too simple... it's too Republican.
Besides, it has already been shown that #1: Even if we opened drilling in sensitive areas (ANWR), the oil wouldn't be available on the market for years, and #2: No one knows how much oil is really there, but it's admittedly a drop in the proverbial bucket compared to US consumption.
Don't look now, but $4.00 gal oil prices are going to be the stimulus to dig our way out of the oil pit that we have all become mired in. Alternate energy innovation will never be sufficiently motivated or financed without the stimulus of high oil prices. This will soon prove to be a blessing in disguise and finally lead us out of the oil abyss. Even the oil companies recognize this and are starting to invest in new avenues of alternate energy to eventually protect their income streams. It's no accident that new refineries are not being built. Anyone who plans 10 years out can see that there will be no need for them and save the huge capital expense and loss.
It is happening even as we think and argue about it. While its a short term inconvenience, I only hope that oil maintains its high price long enough to drive effective change in our energy production.
gerund,
"It's no accident that new refineries are not being built."?
If Bill Clinton had not killed drilling in ANWAR back in 94 or 95 there would be 1 million barrels of oil flowing as we speak and new refineries.
And if you think that we will be oil independent in 10 years your crazy.
What is too simple is your line of thinking. First off most of your larger companies are not paying 40% to the government, as a matter of fact most of your larger companies are paying somewhere around 20% in taxes. The truth is the average American making between $25-$50k, are paying more in taxes than your larger corporations. H-ll yes these companies ought to pay more. They are getting tax breaks at the same time that they are making record profits. This is the line of thinking that's gotten us (as a country) into this mess in the first place. For the last 25 years or so - it has been people like you that have been duped into arguing on behalf of these large corporations while the average American is really carrying the brunt of the economic burdens. The so called "free market" has been helping the corporations, and yet every time these greedy corporations are in trouble they turn to the government for their welfare check courtesy of my tax money and I for one am tired of the b-llsh*t from people like you that haven't a clue as to what is really going on....
Spiritgirl2,
The average national corprate tax rate is 39%
I acually took the time to look it up instead of pulling some number out of my a$$.
What a great idea..........Lets impose yet another tax on companies that already pay out 40% to the government. Except this time we will tax them if we feel they have made "too much profit".
I'm sure this kind of tax won't be passed on to the consumer. And if it is, we will simply get the government to step in and stop that too.
Who needs capitalism anyway?
Instead, maybe we should allow our oil companies to extract our own oil so we can tell OPEC to go to hell.......Or is that too simple?
Thank you Raymond for calling to our attention to the fact that Democrats have in the past been very poor at framing our debates. Thom Hartmann has a book, "Cracking the Code" that is worth reading on how to better communicate our messages.
Meanwhile, I would suggest that we need to overhaul our entire economic system according to principles of Ecological Economics and Georgist Philosophy. In short let us remove taxes on work, production, big and small business (is this heresy?), but raise USER FEES on all natural resources including the extraction of minerals (or mineral imports - i.e. oil), a fee on all pollution (including Carbon) and a fee for the exclusive use of location or sites. The revenue from these user fees would pay for community services, protection of ecological services, and for a rebate into individual social security accounts for retirement, health savings, food, shelter, and energy transition.
The bottom line is Tax Waste, Not Work. ...a Green Tax Shift.
Big oil is and always has been subsidized. The oil depletion allowance was supported by LBJ, for example. Being a Texan, that figures. The other great subsidy of big oil is in our foreign policy and military doctrines, The Carter Doctrine is that the oil must go threw, like the pony express. Centcom was designed to secure the oil in the Persian Gulf and to secure the Caspian Sea area. Now Africon is designed to get oil in Africa where the only new finds are. So the military cost for "energy security" is staggering and has not even secured the supply as in Iraq.
Two other factors to consider: One, petroleum causes global warming. A huge cost is involved. Two, we are entering into a post-petroleum era - whether we like it or not. Other sources of energy must and will be developed. peak oil is just another possible consideration.
So long as the vandals can take the handles, as Bob Dylan said, the pump don't work. Our intrusion into Saudi Arabia during the first Gulf War was the cause for bin Laden to stage attacks on 9-11. Don't believe him - he is quoted by the neocons when it serves their purposes. But others in Africa are blowing up fragile pipelines.
Subsidizing a polluting source of energy is doomed, especially if it requires such massive and ineffective military intervention. Whoever does not understand the above needs a good therapist specializing in reality therapy.
The oil depletion allowance was around well before LBJ became president. It was even mentioned in the movie "Giant" in which James Dean starred as the oil tycoon, Jed Rink. James Dean has been dead for over 50 years. In those days, Federal income tax rates were much higher than they are now, but the loopholes were also more generous.
No, LBJ didn't invent it but he had to sign on to it or he would never have been president. He also had to sign on to the war in Vietnam. His wife owned some stock in KBR so it was a win-win for them.
The PROFIT MARGINS of oil companies are in the single digits whereas GOOG and MSFT are near 30% -- who is getting a windfall?
Yah, increase their taxes -- that will get 'em to find more oil and lower prices. Dumb Dem policy.
How many oil companies have gone bankrupt? (Ones run by George Bush don't count.)
Single digits my ass; how long are you rethugs going to push that BS misinformation? Do you really believe you can sell that kind of nonsense? There's no possible way for the commodity price to quadruple and the profit margin to stay in single digits when the cost of production hasn't increased by the same percentage.
Typical republican BS; you guys align yourselves with big business then assume that you can bullshit everyone who isn't a rethug about business fundamentals...pathetic.
Ugh. Another comment by someone who never studied economics.
Profit margins are totally unrelated to the price of the commodity, except to the extent the company owns a large inventory of the commodity. Just because the underlying cost of goods goes up does not mean your profit margin increases. If you are a dealer in a commodity, i.e., like Exxon, you buy it, refine it, and then sell it, you are just a middle man.
If you are also in the exploration business, as Exxon is, you might also profit from inventory appreciation. But that is a one-time thing. And the cost to explore and produce it has gone up dramatically.
The author of this comment and the author of the article should both trot down to their local community college and take Econ 101.
I support a really really really big oil cartel excess profits tax - called nationalization.
Just nationalize them.
It's us or them.
Socialism on a left wing website? LOL
What does the government know about finding and drilling oil?
The entire oil enterprise is subsidized by our military policy of securing the access to oil in the Caspian Sea area, Iraq, Saudi Arabia and Africa. Then there is the oil depletion allowance. The futures and options markets take about 60% off the top. So we pay not only at the pump but also on our 1040's. After all, our military spending is in the range of a trillion per year if you include the cost of the wars in Iraq and Afghanistan. Then the cost of global warming wipes out everything. Pollution itself without climate change is huge.
The invisible hand of the free market will guide us to other energy sources eventually. Just like when caveman discovered fire, he also discovered that his hand could get burnt. Bin Laden blames our intrusion into Saudi Arabia in 1991 during the first oil war. Now we are fighting all over the globe for oil. This costs money and it is ineffective in any event. The long-term analysis calls for a post-petroleum age, just as caveman discovered that fire wasn't good enough.
Do you think we should attack Canada, Mexico, Venezuela and Saudi Arabia and seize their oil wells as well? That's where most of our foreign oil comes from. The US no longer produces enough oil to effectively set the world's oil price as it did in 1971 and earlier.
There is no friggin shortage of oil-this is being driven by speculators-with the real estate market a bust-investors are playing the commodities markets driving prices artificially on speculation-that and a dollar that is falling to the bottom of the well. We will be surprised to find out this is bushes way of convincing us to drill in the artic and offshore??? scare the american people and they will let you do anything--the patriot act-seems to me Obama voted FOR the Bush/Cheney energy bill that gave them the tax breaks in the first place--he is a little late to the party
Democrat Quote of the Year:
Chuck Schumer (D-NY) once again claimed "if [Saudi Arabia] did a million barrels of oil a day increase from today, it would go down about -- the translation to gasoline would be about $.50 a gallon, maybe $.62."
Yet, on May 7, Schumer felt a likely similar increase from drilling in ANWR would "reduce the price of oil by a penny."
The French get almost 100% of their electricity from nuclear power, export electricity from their nuclear plants to other European countries and have not fallen into the Atlantic Ocean. Maybe we have something to learn from the French when it comes to nuclear power technology. I think almost all of the electric power plants built in recent years in PG&E's service area (much of Northern Calif.) is based on natural gas, which is becoming much more expensive, driving up the cost of air conditioning in the summer and heating in the winter.
Dems and their environmentalist buddies will never allow nuclear plants . . . currently it takes over 10 years just to submit the application.
Reducing demand doesn't leave behind a toxic residue that lasts for a million years or so, but actually, environmentalists are beginning to admit that the problem is so large, atomic energy is going to have to be part of the solution. Sigh---
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