Letters to the Editor
Readers write about windfall-profit taxes on oil companies.
Big Oil needs regulation as an economic necessity
Regarding Justin Danhof's Aug. 7 article, "Congress's unsound fury over Big Oil": Oil is a necessity. It may not be edible, but it is a fundamental building block for all industrialized nations. Popcorn and movies are luxury items, as are trips to Disneyland or Las Vegas – behavior toward these on the supply and demand curves are different.
Sellers or suppliers of luxury items have to worry about overpricing, or basically pricing themselves out of the market. Suppliers of necessary items don't worry as much about this.
Are you going to stop using electricity, or going to work or to the hospital? Probably not. That is why we need elected officials to put rules in place or oversee suppliers of necessities. No society or country can afford to be a purely capitalistic market.
Regarding Justin Danhof's recent Opinion piece on imposing windfall taxes on Big Oil: Oil companies get a percentage of the sale price, and if the sale price is higher, the dollar amount to that fixed percentage appears higher. The reason the dollar amounts are so high is not "windfall" profits, but the fact that so much oil is changing hands at any given time.
Those are not recognized profits; they are earnings, before all the taxes and reinvestments are factored in. To steal the initial earnings from those companies would prohibit them from reinvesting and acquiring the materials and machinery they need to bring more oil in to refine. Then those costs would be passed on to consumers, as is normal practice in any business, and we would have $5-a-gallon (or higher) fuel costs.
It is time people stand up to Congress and tell them to get out of the way and quit meddling with private industry.
We must, for our own security at the minimum, drill the oil that is off our coast. We must drill the oil in ANWR, which is not as pristine as people say. Also, we must build some new infrastructure and refineries.
If we did so, we could have $1-a-gallon fuel costs again.
Regarding the recent Opinion piece on Big Oil: We've been told for months that the high gas prices are entirely due to supply and demand, but other than some people giving up driving any more than they absolutely have to, what has really changed?
Has the population or the number of vehicles declined anywhere in the world?
Prices are coming down right now because consumers have cut back some and supplies are backing up, enticing us to drive more.
That does not mean there has not been rampant speculation by commodities traders and some manipulation of the supply by the oil companies to boost prices. Why should they produce a million barrels of oil when they can make the same money on half a million?
In response to the recent Opinion piece on Big Oil: Profit margin analysis is used solely to compare the health of a company relative to its competitors within the industry.
If Mr. Danhof wishes to compare profitability among industries, he could have used net profit dollar amounts or he could have used market capitalization to compare the size of industries.
What he would have quickly discovered is that the oil industry is vastly more profitable and bigger.
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