"Socializing" oil companies

[Tex]

Originally Posted by Ma'ake

Hence the use of the term "windfall". A big part of current oil profits are essentially "unearned"... the additional profit is icing on the cake due to merely following the prescribed, acceptable profit margin and watching their bank accounts balloon, passing along their higher input costs & rationalizing the greater "windfall" profits as merely the market at work.

Have airlines been able to increase their net profits by jacking up prices, keeping the same profit margin and shrugging their shoulders as the price of jet fuel has sky-rocketed? No, like just about every other market with high levels of competition they've attempted to keep a lid on their prices and put short term profitability at risk while hoping for better conditions, have made efforts to mitigate that part of their cost structure (made plans to purchase new airplanes, retired airplanes that are 5 years old because they burn too much fuel, etc.)

Only recently have airlines had to take extraordinary measure to pass along the costs, while the cost of jet fuel has been steadily climbing for years.

What other industries see explosive growth in profits due to inflation in inputs? If the price of beef doubles, does McDonalds see their net profits rise commensurately? No. If a critical memory factory in Taiwan is destroyed by typhoon, does Dell & HP see their profits rise to record levels? Again, no.

All of the standard market-worship reactions are fine & good, but the market model assumes related markets are functioning properly. In this case, the market for unrefined petroleum is badly distorted for the reasons I stated above.

The demand for gasoline is relatively inelastic... we won't see a rapid 30% drop in the demand for gasoline, in spite of price spikes. The entire economy is at risk of inflation yet Big Oil sits up high on a growing stack of cash, ambivalent about the effects their industry has on the nation. Profits have never been this high, life is grand. It's the ideal scenario, really.

Windfall taxes arise as an option when excessive greed emerges, which is exactly what we have now. The threat of windfall profits is a device political leaders can use to encourage more responsible behavior from greedy corporations.

"Unearned." Ha. What irony: "unearned" is what taxes are to the federal government. "Windfall" is a term made up by politicians who want a cut of the profit. You're just transferring greed from one organization to another, producers to leeches, er ... consumers. If someone's got to be greedy, I'll choose the capitalists over the politicians and bureaucrats any day.

And no, increase in raw goods costs doesn't "automatically" result in an increase in prices. Sometimes it takes time for the market to price them in, but price them in it does. Companies must make profits or they fold, and I would like to hear by what right any bloated, inefficient government gets to choose what counts as "too much."

This idea just oozes with the idea of "we know what's better for the common good than you do," the heart of socialism.

No thanks.