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First of all McClatchy has had some articles on this in the last few days. "These steps could lower oil prices, but nobody'll take them" by Kevin G Hall comments about 3 reasonable ways to check rising prices(Monday June 9,2008). Today's (Wednesday, June 11, 2008) deals with the US Commodities Exchange Commission wanting to look into speculation and other matters that might play important role in the price increase.

It seems that another bubble might building due to our own fund managers taking our 401k and 403b monies and throwing them into the oil commodities market. The result of this bubble might have similar consequences as the housing crisis with billions and billions of lost revenue when the bubble bursts. It seems that we have little or no regulation of oil sales on the world market.

So yesterday the Senate Republicans refused to tax the high profits of the oil companies implying that if the profits were taxed the oil companies would simply raise prices to compensate for the tax. I'm not sure that is true. Oil company profits have never been higher. If they could have simply raised prices at the pump before this market speculation then why didn't they?

I think we aren't being told the complete truth about what is driving the prices higher and that our senators of both parties should being doing more than lip service concerning the buying and selling of this important commodity. We are not really getting much from the Democratic side either. Yesterday, Obama said that the price rise was caused by the market and he didn't seem to have any ideas about easing the pain.

Originally posted to donmyers on Wed Jun 11, 2008 at 05:44 AM PDT.

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Comment Preferences

  •  There may be reasons (3+ / 0-)
    Recommended by:
    burrow owl, tamasher, BraveheartDC

    to talk about a windfall profits tax, but I don't think trying to lower the price at the pump is one of them, at least not in the short term.  The only connection I have heard mentioned between a windfall profits tax on oil companies, and lowering the price at the pump, is the argument that those profits should be put into alternative energy and that, 10 or 20 years down the road, will make us more energy independent, lower our dependance on oil, and thereby lower the price.  

    Look, right now, the price of gasoline is high mainly because the price of crude oil is so high.  (At $135 or so a barrel, some analysts believe the price at the pump should be closer to $5 already).  "Big Oil" are making the vast, vast majority of their profits on what they call "upstream" activities -- exploring for, producing, and selling crude oil.  That's where the increased price of crude oil comes in.  Once that crude oil gets to a refinery to be turned into gasoline, the profits go way down.  Refinery margins are pretty low.  In fact, a lot of refineries around New Orleans have long ago been sold by "Big Oil" to some smaller companies whose main busines is operating refineries.  Those refineries have to buy crude oil at that $135 per barrel, turn it into gasoline, as sell it to the wholesale distibutors, who sell it to the gas stations.  Your corner Shell station, most of the time, is owned by an independant operator, a small business person, who is paying for his station to be "branded" and is buying Shell branded oil.  Despite what you see at the pump, there are not real big profit margins on that "downstream" part of the business -- the profit is "upstream" on that barrel of crude oil.  

    The only way to make any significant effect on the price at the pump is to lower the price for a barrel of crude oil.  And of course, diary after diary has been written here about why the price for a barrel of crude oil is so high, but that's for another day.  Suffice it to say that, while a windfall profits tax may be an attractive idea for many reasons, there is not a real obvious link between increasing taxes on a barrel of crude oil (which is what the last windfall profits tax on "Big Oil" did) and lowering the price of gasoline.  

  •  Sorry, but... (0+ / 0-)

    A windfall profits tax on oil companies may feel good, but would be disastrous for the price at the pump...and consequently, for anyone in congress who supports such a measure (which I believe is bad economic policy anyway).

    Carter tried this...and we all know how that worked out.

    "I drank what"? -Socrates

    by BraveheartDC on Wed Jun 11, 2008 at 06:52:22 AM PDT

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