As the prices at the pump continue to rise, the people seem willing only to point their fingers at those greedy oil companies, rather than the government that has created the problem and then exacerbated it with outrageously high taxes on the product. How can Exxon Mobil justify such high gas prices, all the while paying CEO Lee Raymond a $400 million retirement package? Tom Doggett of Reuters called this action a "shamefull display of greed." But is it shameful for a successful and profitable company operating in a quasi-free market to reward its’ CEO for a job well done? Most people do not realize that the profits collected on a gallon of gasoline are actually lower than the tax collected by the government on that same gallon of gasoline. And now the politicians are playing on the ignorance of the American people by calling for a “windfall profit tax” on the oil companies to off set these rising gas prices. It is too bad that corporations do not pay taxes; they pass them on to consumers via higher prices. So how does this help the situation?
The focus of anger towards the oil companies at the problem of rising gas prices has been wholeheartedly misdirected by the people. When reporters like Doggett along with many other members of the media, and both Republican and Democrat politicians speak out against the oil companies as the root of the problem they fan the flames of an anti-capitalist, anti-free market mentality. They are doing the U.S. a great disservice with their rhetoric.
People should realize that it has been the government’s environmental policies that have created this problem, not the oil companies. Mandates set forth that have not allowed a new refinery to be built in the last thirty years have stifled competition in this industry. Regulations that require so many different blends of gasoline depending on the region the gas is sold in also contribute to higher costs associated with producing and distributing the product. Since only certain blends can be sold in certain areas, shortages are created – thus we pay higher prices.
Environmentalists have blocked oil drilling in Alaska for many years now. Floridians do not want U.S. oil companies to be able to drill for oil of the coast of Florida because they are afraid there might be an oil spill of some kind so close to their homes. Many people are probably unaware of the fact that Fidel Castro has signed agreements with Spain, Canada, and China to explore offshore drilling northeast and northwest of Havana just about 50 miles from Key West. I wonder how the Floridians feel now. They have blocked U.S. companies from exploration of this area due to fears of oil spills, but U.S. oil companies are much better equipped to safely drill for oil than China and Spain.
Now I support protecting our environment, but there has to be a way to do it without creating virtual monopolies and oil shortages as unintended consequences. World wide oil demand has increased to a point that these reckless environmental policies are going to create a gasoline price disaster. Something must be done, or better yet undone, to allow for more competition, and easier production and distribution of gasoline.
But perhaps the vilest aspect of this whole debate lies in the hidden truth about the secret taxes paid on a gallon of gasoline. I say secret because this is the one product consumers purchase that they are largely unaware of the tax rate they are paying. Why is this so? The federal government takes 18.4 cents of every gallon of gas sold and the states take an average of 27.5 cents per gallon. This is taken from consumers at the pump before they even realize that it is gone much like the federal withholding tax from their paychecks. It just so happens that the average profit made on a gallon of gasoline by the companies that produce the gas is only about 8 cents per gallon. And then these same companies pay taxes on those profits.
It is time for the American people to wake up and understand what is really going on here. We need to hold our government accountable for its’ unjust actions that have put us in this position, not the oil companies who are only responding to market forces and unjust government policies.
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9 comments:
"But is it shameful for a successful and profitable company operating in a quasi-free market to reward its’ CEO for a job well done?"
I have to say yes here since this shows a company that seems to operate for the benefit of its management and not its shareholders or customers. This was a gratuitous payment that does nothing for the health of the company, and the outgoing executive simply happened to benefit from a period of artificially high prices.
It just seems to me that society is now imposing a double standard on oil companies. They are now expected to handle their financial affairs differently than most other businesses when it comes to prices and wages, simply because they are now able to take advantage of favorable market conditions created by government. I am all for responsibility in the market place, but I just worry about the slippery slope when people begin to bash companies for paying CEOs what they consider to be too much money. This kind of thing is for the market to decide.
If the market is comprised of the aggregate of everyone's acting on their own preferences, the market also includes folks, such as myself, who prefer to trade with companies that manifest a little less contempt for shareholders and consumers. We act on such preferences all the time, and this is just as much a part of the market as acting solely on price.
I think you make good sense, brewrunner. With all of this political theater going on in DC, I think we should try to remember that the government makes more at the pump than the oil co do...taxes are the 2nd biggest contributor to pump price (behind the cost of crude.) It's outrageous, imho.
It's completely outrageous for the government to talk about raising taxes when they are already making over 40 cents to ExxonMobile's 8 cents on the dollar--and that's before profits!
We all can probably agree that we need a comprehensive energy policy from government at all levels. The question that arises in light of brewrunner's cogent analysis is whether governments which benefit from the status quo can ever arrive at such a policy. Just a thught.
I understand what is being said. And I agree that the government is making massive profits on oil. However, I do believe that we should be outraged at the amount of money being paid to CEO's. Yes the oil company is taking advantage of favorable market conditions, as other companies do all the time, but when it starts cripling middle america, I think we need to be concerned. These companies are selling oil, and oil is no longer a luxury. We need it in order to function in today's world. Companies that rake in profits on things that are not necesities in todays society can get away with it, and justly so. However, the businesses that supply the necesities that keep our markets and people afloat should not be raking in continuously increasing profits while low income families suffer the cost. So before we completely excuse the oil companies and blame the government, don't you think that the oil companys' responsibility as a supplier of a necessity should be reevaluated?
People are aggravated with the government. However, you may be right, people don't seem to be outraged at the fact that the government is gaining a lot of tax money over every barrel. People are outraged because the government hasn't done anything to restrict the prices. Either way, the American public will come to the same result (regardless of whether or not they know why the government hasn't done anything)...something needs to be done. I think its lovely how people sit back, criticize, and defend the profits and actions of the Oil Companies. I'm sure if the prices were effecting your wallet, as much as they are affecting other's wallets, you would be singing a difference tune.
Sorry to rant, but this topic is quite frustrating.
I appreciate your comments Anonymous, but I'm not sure your solution is workable.
Simple economics (and historical events) show that when governments impose price ceilings, shortages are created that in fact worsen the original problem. The government did restrict the price of oil in 1979, which created shortfalls of disastrous proportions. It was typical for gas stations to run out of gas and for cars to wait in extremely long lines just to get gas. It is estimated that some 150,000 barrels of oil per day were lost while car engines were idling while motorists were waiting in the long lines to get gas. With the amount of oil the U.S. currently has in reserve plus the untapped areas off the Florida coast and in Alaska, we have enough oil to last us until we can come up with an alternative fuel. Until then we have mostly ourselves and our restrictive government to blame for our current delimma.
I'm sure if the prices were effecting your wallet, as much as they are affecting other's wallets, you would be singing a difference tune.
I'm not sure exactly who the "others" are that you are speaking of, but I do know that this past Memorial day weekend that road travel was up despite higher gas prices according to an MSNBC report.
Sorry, that report was from 2006 Memorial Day weekend, but the numbers are still up. Here is a 2007 source.
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