Dems propose 'Reasonable Profits Board' to regulate oil company profits

[Valin]

The Hill:

Pete Kasperowicz
01/19/12

Six House Democrats, led by Rep. Dennis Kucinich (D-Ohio), want to set up a "Reasonable Profits Board" to control gas profits.

The Democrats, worried about higher gas prices, want to set up a board that would apply a "windfall profit tax" as high as 100 percent on the sale of oil and gas, according to their legislation. The bill provides no specific guidance for how the board would determine what constitutes a reasonable profit.

The Gas Price Spike Act, H.R. 3784, would apply a windfall tax on the sale of oil and gas that ranges from 50 percent to 100 percent on all surplus earnings exceeding "a reasonable profit." It would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms. Unlike other bills setting up advisory boards, the Reasonable Profits Board would not be made up of any nominees from Congress.

The bill would also seem to exclude industry representatives from the board, as it says members "shall have no financial interests in any of the businesses for which reasonable profits are determined by the Board."

(Snip)





H/T Hot Air

[Argyle58]

Now this should be used in the dictionary as an example of hypocrisy!! On the average oil companies make 10 to 11 cents per gallon profit on the sale of gasoline and diesel fuel. Combined federal and state revenue from taxing these same fuels average about 48.8 cents per gallon on gasoline and 53.5 cents on diesel. And those figures are just from the point of sale.

 

On the domestic production side, oil is taxed starting at the well head on the average of 7.2% in most producing states. If the oil is transported by pipeline it is taxed again, by both federal and state agencies at varying rates depending on location and destination. At the refineries, the oil is again taxed, by both federal and state agencies, depending on the type of final product that the oil becomes, and the waste is taxed one more time.

 

It has been document that the Federal government and the various States make approximately ten times more off of the exploration, production and refinement than do the companies who produce these products. I find the idea of a "Reasonable Profits Board" to be comically ironic.

[clearvision]

The same board probably will have the power to make sure companies in other industries MAKE a reasonable (read any) profit, for instance in wind and solar.

[Valin]

Argyle58

 

Just stop it! This mucking about with facts will only get you in trouble. Don't you know the bureaucrats know how much everyone should make, and what we should spend it on?

[Casino67]

The Dems tried this before:

 

Rep. Kanjorski's Unreasonable, Unconscionably Ridiculous Idea

 

 

"While Hillary Clinton may have failed ECON 101 along with John McCain, it appears as if Rep. Paul Kanjorski [D-PA] may have been enrolled in Marxism 450 at the time," according to The Tax Foundation. Reason? Exhibit A: Kanjorski's House Resolution 5800, the "Consumer Reasonable Energy Price Protection Act of 2008," which would:

 

Tax the oil industries’ "windfall profits."

Set up a "Reasonable Profits Board" to determine when the oil companies’ profits are in excess, and then tax them on those windfall profits.

As oil and gas companies’ windfall profits increase, so would the tax rate for those companies.

In this news article, Kanjorski said his legislation will encourage oil companies to lower prices to prevent them from receiving higher tax rates.

 

A few Questions/Comments:

 

1. Oil companies don't set oil and gas prices, global market forces do. The fact that oil and gas prices change daily demonstrates very clearly that oil companies are at the mercy of market forces of supply and demand.

 

2. If you tax something [oil], you get less of it. If you get less of something [oil], prices go up, not down.

 

3. How does Rep. Kanjorski know what "reasonable profits" are? He might start by having Congress investigate the 57 industries listed above (click to enlarge, data available here) that already have higher profits than the average 9.6% profit margin of the "Major Integrated Oil and Gas Industry" (which includes Exxon (XOM), Chevron (CVX), ConocoPhillips (COP), BP (BP), Royal Dutch Shell (RDS.A), etc.).

 

(Source)

 

Failed then, will fail this time too. Dems seem to have the greatest ideas don't they?

[Argyle58]

Let us not forget what is meant by "The Dems tried this before" means.

 

Jimmy Carter's windfall profit tax collapsed the domestic production of oil, costing hundreds of thousands of jobs and billions to the economy. This collapse in the domestic oil industry was the direct cause of the largest bank failure in the history of the United States (you've heard of the Savings and Loan crisis?). Even after the tax was repealed, the industry never again put that level of investment in domestic production, which is part of the reason that we are now so dependent on foreign oil.

[Casino67]

Let us not forget what is meant by "The Dems tried this before" means.

 

Jimmy Carter's windfall profit tax collapsed the domestic production of oil, costing hundreds of thousands of jobs and billions to the economy. This collapse in the domestic oil industry was the direct cause of the largest bank failure in the history of the United States (you've heard of the Savings and Loan crisis?). Even after the tax was repealed, the industry never again put that level of investment in domestic production, which is part of the reason that we are now so dependent on foreign oil.

 

IMO there were multiple reasons for the S&L crisis. In my biased opinion it was the result of Carter's ineptitude and the Dems going along to get along. Inflation, oil prices, real estate market collapse, Carter, interest rates out of sight, Carter, et al.

[Argyle58]

Let us not forget what is meant by "The Dems tried this before" means.

 

Jimmy Carter's windfall profit tax collapsed the domestic production of oil, costing hundreds of thousands of jobs and billions to the economy. This collapse in the domestic oil industry was the direct cause of the largest bank failure in the history of the United States (you've heard of the Savings and Loan crisis?). Even after the tax was repealed, the industry never again put that level of investment in domestic production, which is part of the reason that we are now so dependent on foreign oil.

 

IMO there were multiple reasons for the S&L crisis. In my biased opinion it was the result of Carter's ineptitude and the Dems going along to get along. Inflation, oil prices, real estate market collapse, Carter, interest rates out of sight, Carter, et al.

 

Hate to differ, but the S&L crash was directly related to the collapse of Penn Square Bank in Oklahoma City. Penn Square executives were making unsecured loans for tens of millions of dollars to virtually anyone who asked for them, as long as they were in the petroleum industry. Penn Square then sold these loans to S&Ls because, at the time, they were not subject to the same banking laws and regulations as "regular" banks. Nor were the S&Ls covered by the FDIC at the time. The largest purchaser of these unsecured notes was Lincoln National S&L in Illinois, who then resold them to other S&Ls around the country. When the bottom fell out of the oil market in the early 80's because of the Peanut Farmer's policies, the debtors to Penn Square were unable to repay their loans and what little collateral there was to be had was virtually worthless because the industry they used to service had disappeared. With the collapse of Penn Square and it's worthless loans, the house of cards that was created by the selling and reselling of these notes fell in upon itself.

 

While there were other factors, primarily the lack of oversight of the industry, the facts above detail how the failure started. I know these details only because I was a part of the audit team that investigated the Penn Square crash. Now, you could place the entire blame on unscrupulous bankers, but it makes a great anecdote about the Law of Unintended Consequences and what happens when government do gooders decide that they, and they alone, know what's best for us.