Bad bad bad Profits

Hillary Clinton, like her rival, Barack Obama, she’s pushing a massive “windfall profit” tax on those “greedy” oil companies. “There is something seriously wrong with our economy when Exxon’s record $11 billion in quarterly profits are seen as a disappointment by Wall Street,” Clinton said Thursday. “This is truly Dick Cheney’s wonderland.”

No, what’s seriously wrong is that politicians such as Clinton can cynically manipulate public opinion to enact disastrous policies.

Indeed, rather than be upset at Exxon’s profits, Americans should be thrilled — and angry at a Congress that doesn’t seem to want to encourage the oil industry to make even more.

Our free-market economy is built on profit. Higher profits mean more jobs, higher incomes, more investment in equipment and people, higher standards of living. Yes, profits are the engine for all of this — and that includes the profits of “Big Oil.”

By signaling that supply is scarce, higher profits encourage more production. Except, that is, when Congress through its inept lawmaking stands in the way. And that’s the case now with the oil industry.

Congress seems almost constantly at war with the oil companies — slapping them with taxes and pillorying their CEOs while ignoring the fact that higher profits lead to more exploration, drilling and development.

If anyone is to blame for our current energy mess, it’s Congress. At least 20 billion barrels of oil sit untapped in Alaska and another 30 billion lie offshore. Such sources that could help satisfy U.S. demand for years to come. Yet, Congress has put them out of bounds.

Instead, Congress scapegoats oil profits. In reality, according to Ernst & Young, from 1992 to 2006 the U.S. oil industry spent $1.25 trillion on long-term investment vs. profits of $900 billion.

Truth is, oil industry profits are in line with the rest of American industry. In 2007, a record year, they earned 8.3 cents per dollar of sales. Beverage companies and cigarette makers, by contrast, earned 19.1 cents. Drug makers, 18.4 cents. Indeed, all manufacturers, 8.9 cents on average, made more than “Big Oil.”

Besides, we’ve tried windfall profits taxes before, in the early 1980s, and they were an utter failure. As the Congressional Research Service found, revenues produced for the government were nearly 75% below what was expected. Meanwhile, domestic oil output fell 8%, while oil imports surged 16%.

That’s just poor policy, and even worse economics.

Remember: Oil companies don’t really pay “windfall profit” taxes, anyway. You do. Some 50 million Americans today own oil company stock, either directly or through 401(k)s and mutual funds. Don’t be suckered: “Windfall profits” taxes come right out of your retirement account, not out of the oil industry’s business.

Oh sure, Big Oil’s profits are up. But so are the taxes they pay. In 2006, that came to $90 billion — up 334% in just four years.

This is how Clinton-style populism works. It starts with ignorance and ends with serious damage to our economy.

Alaska vs. Polar Bears

The state of Alaska will sue the U.S. government to stop the listing of the polar bear as a threatened species, arguing the designation will slow development in the state, Gov. Sarah Palin said on Wednesday.

Palin said the state will file a lawsuit in U.S. District Court in Washington challenging U.S. Interior Secretary Dirk Kempthorne’s decision to grant Endangered Species Act protections to the polar bear.

The Republican governor has argued that the ice-dependent polar bear, the first mammal granted Endangered Species Act listing because of global warming, does not need additional protections.

“We believe that the listing was unwarranted and that it’s unprecedented to list a currently healthy population based on uncertain climate models,” said Alaska Assistant Attorney General Steven Daugherty.

Even though Kempthorne enacted a rule aimed at precluding any new restrictions on oil and gas operations as a result of the listing, the Palin administration believes a wide variety of other development activities in Alaska would be hampered if the listing goes through, Daugherty said.

Any development or activity requiring federal permits or using federal funds would have to engage in a “consultation” process to ensure that polar bears are not harmed, he said.

That consultation, mandated by the Endangered Species Act, “is a long and time-consuming process,” he said. “It’s just, basically, a big time-and-money-waster.”

Why not just limit the hunting of polar bears if you are worried about the size of their population (which has been growing and is healthy by the way).

Oil “hearings”

It probably is not very accurate to call them hearings as there is not a great deal of listening going on by our wonderful senators:

Senator Chuck Schumer claims that coercing Saudi Arabia to increase oil production by 1 million barrels a day would drop the per barrel price by $25, saving Americans 62 cent per gallon at the gas pump. Yet, somehow, that same amount of oil coming from Alaska’s Arctic National Wildlife Refuge would only ease oil prices by a penny.

In a Senate floor speech he gave on May 13^th, the New York Democrat insisted that:

“If Saudi Arabia were to increase its production by 1 million barrels per day that translates to a reduction of 20 percent to 25 percent in the world price of crude oil, and crude oil prices could fall by more than $25 dollar per barrel from its current level of $126 per barrel. In turn, that would lower the price of gasoline between 13 percent and 17 percent, or by more than 62 cents off the expected summer regular-grade price – offering much needed relief to struggling families. “

Schumer repeated these words almost verbatim when grilling oil company executives during yesterday’s Senate Judiciary Committee hearings.

Yet Schumer’s daily magic number of 1 million barrels is the exact increase experts believe we would today be pumping through the Alyeska pipeline had Bill Clinton not vetoed ANWR drilling back in 1995.  And even the most rabid anti-domestic-drilling Democrats don’t take issue with that figure. 

So then, the increase he demands of “Bush’s friends,” the Saudis – which he claims would reduce prices by up to 25 percent — is the exact amount he argued earlier this month would only “reduce the price of oil by a penny” were it coming from ANWR – eco-sacred breeding ground of the Porcupine Caribou.

It doesn’t take a Ph.D in economics to know that both figures can’t be right.

Nor one in Poli-Sci to know why they’re so starkly different nonetheless.

Posted on Omaha radio station website

Our thoughts regarding gay marriage have been published on KFBA radio’s website under Scott Vorheis’ page.  Scott is on before Rush Limbaugh on AM 1110.

http://www.kfab.com/pages/voorhees.html

My thoughts on gay marriage

This is a difficult topic for me as it is not one of my hot button issues.  However, I find it terribly ignorant and disingenuous for the pro-gay marriage people to assume that those against gay marriage are some sort of religous nuts or haters of homosexuals or some sort of homophobes.  That is stupid and an embarrasing way to conduct a debate.  Allow me to offer my thoughts on why I am against gay marriage:

In a libertarian view the domestic purposes of government are two fold: 1) Uphold and judge the execution of contracts, and 2) Protect the innocent/unknowing/unexpected members of a contract.  If this is the case, then Marriage is the ultimate example of this.  What other contract that people can enter into has the possible consequence of producing new people?  Marriage is for the purpose of providing a contractual protection to children —planned or unplanned.  The fact that society has lost sight of this is unfortunate.  But at the end of the day, there is NO chance that two gay men or women will accidentally get pregnant.  Therefore, there are no innocent members of a contract to protect.  In a gay relationship ALL provisions for the future can be agreed to by ALL parties involved in the contract—they are ALL adults.  There is no innocent member of the contract for a government to protect. 

 

One might counter that in this day and age where people have premarital sex like they go to fast food restaurants, that this thinking is outdated.  However, this is the reason that there are numerous incentives or government benefits to those who legally confirm the physical consummation that they have experienced.  In essence we want them to choose marriage even post facto because it accrues to the benefit of the innocent member of the contract.

 

If we redefine marriage what we are essentially saying is that this basis for marriage is irrelevant.  In essence we are defining marriage as simply a way to structure life long adult relationships—a way for any adult to declare another adult as having special legal status and rights relative to them self.  There is no benefit that accrues to society in this proposition so there should be no social benefit offered.

 

Marriage is not a right.  In its most basic secular form it is a three way contract between two consenting adults and the government.  The government offers consideration as a quid pro quo that the two adults will take care of any offspring that result and not create a social burden for society.

 

“Appeasement reaction”

Here is an article written by Mark Steyn that I found interesting.  I decided to include it in full hoping to spur discussion: http://www.ocregister.com/articles/president-obama-words-2044703-bush-talking

“That’s enough. That – that’s a show of disrespect to me.”

That was Barack Obama, a couple of weeks back, explaining why he was casting the Rev. Jeremiah Wright into outer darkness. It’s one thing to wallow in “adolescent grandiosity” (as Scott Johnson of the Powerline Web site called it) when it’s a family dispute between you and your pastor of 20 years. It’s quite another to do so when it’s the 60th anniversary celebrations of one of America’s closest allies.

President Bush was in Israel the other day and gave a speech to the Knesset. Its perspective was summed up by his closing anecdote – a departing British officer in May 1948 handing the iron bar to the Zion Gate to a trembling rabbi and telling him it was the first time in 18 centuries that a key to the gates of the Jerusalem was in the hands of a Jew. In other words, it was a big-picture speech, referencing the Holocaust, the pogroms, Masada – and the challenges that lie ahead. Sen. Obama was not mentioned in the text. No Democrat was mentioned, save for President Truman, in the context of his recognition of the new state of Israel when it was a mere 11 minutes old.

Nonetheless, Barack Obama decided that the president’s speech was really about him, and he didn’t care for it. He didn’t put it quite as bluntly as he did with the Rev. Wright, but the message was the same: “That’s enough. That’s a show of disrespect to me.” And, taking their cue from the soon-to-be nominee’s weirdly petty narcissism, Nancy Pelosi, John Kerry, Joe Biden and Co. piled on to deplore Bush’s outrageous, unacceptable, unpresidential, outrageously unacceptable and unacceptably unpresidential behavior.

Honestly. What a bunch of self-absorbed ninnies. Here’s what the president said:

“Some seem to believe that we should negotiate with the terrorists and radicals, as if some ingenious argument will persuade them they have been wrong all along. We have heard this foolish delusion before. As Nazi tanks crossed into Poland in 1939, an American senator declared: ‘Lord, if I could only have talked to Hitler, all this might have been avoided.’ We have an obligation to call this what it is – the false comfort of appeasement, which has been repeatedly discredited by history.”

It says something for Democrat touchiness that the minute a guy makes a generalized observation about folks who appease terrorists and dictators the Dems assume: Hey, they’re talking about me. Actually, he wasn’t – or, to be more precise, he wasn’t talking onlyabout you.

Yes, there are plenty of Democrats who are in favor of negotiating with our enemies, and a few Republicans, too – President Bush’s pal James Baker, whose Iraq Study Group was full of proposals to barter with Iran and Syria and everybody else. But that general line is also taken by at least three of Tony Blair’s former Cabinet ministers and his senior policy adviser, and by the leader of Canada’s New Democratic Party and by a whole bunch of bigshot Europeans. It’s not a Democrat election policy, it’s an entire worldview. Even Barack Obama can’t be so vain as to think his fly-me-to-[insert name of enemy here]concept is an original idea.

Increasingly, the Western world has attitudes rather than policies. It’s one thing to talk as a means to an end. But these days, for most midlevel powers, talks arethe end, talks without end. Because that’s what civilized nations like doing – chit-chatting, shooting the breeze, having tea and crumpets, talking talking talking. Uncivilized nations like torturing dissidents, killing civilians, bombing villages, doing doing doing. It’s easier to get the doers to pass themselves off as talkers then to get the talkers to rouse themselves to do anything.

And, as the Iranians understand, talks provide a splendid cover for getting on with anything you want to do. If, say, you want to get on with your nuclear program relatively undisturbed, the easiest way to do it is to enter years of endless talks with the Europeans over said nuclear program. That’s why that Hamas honcho endorsed Obama: They know he’s their best shot at getting a European foreign minister installed as president of the United States.

Mo Mowlam was Britain’s Northern Ireland secretary and oversaw the process by which the IRA’s Gerry Adams and Martin McGuinness became ministers of a Crown they decline to recognize. By 2004, she was calling for Osama bin Laden to be invited to “the negotiating table,” having concluded he was no different from Adams: Stern fellow, lots of blood on his hands, but no sense getting on your high horse about all that; let’s find out what he wants and give him part of it.

In his 2002 letter to the United States, bin Laden has a lot of grievances, from America’s refusal to implement Sharia law to Jew-controlled usury to the lack of punishment for “President Clinton’s immoral acts.” Like Barack Obama’s pastor, bin Laden shares the view that AIDS is a “Satanic American invention.” Obviously, there are items on the agenda that the free world can never concede on – “President Clinton’s immoral acts” – but who’s to say most of the rest isn’t worth chewing over?

This will be the fault line in the post-Bush war debate over the next few years. Are the political ambitions of the broader jihad totalitarian, genocidal, millenarian – in a word, nuts? Or are they negotiable? President Bush knows where he stands. Just before the words that Barack Obama took umbrage at, he said:

“There are good and decent people who cannot fathom the darkness in these men and try to explain away their words. It’s natural, but it is deadly wrong. As witnesses to evil in the past, we carry a solemn responsibility to take these words seriously.”

Here are some words of Hussein Massawi, the former leader of Hezbollah:

“We are not fighting so that you will offer us something. We are fighting to eliminate you.”

Are his actions consistent with those words? Amazingly so. So, too, are those of Hezbollah’s patrons in Tehran.

President Reagan talked with the Soviets while pushing ahead with the deployment of Cruise and Pershing missiles in Europe. He spoke softly – after getting himself a bigger stick. Sen. Obama is proposing to reward a man who pledges to wipe Israel off the map with a presidential photo-op to which he will bring not even a twig. No wonder he’s so twitchy about it.

Republican blunders

I am happy to see the base’s angst at Republicans and wanted to contribute.

Senate Minority Leader Mitch McConnell, R-Ky., netted tax breaks for the thoroughbred horse racing industry in the farm bill worth $126 million over the next 10 years, a provision that helped guarantee his support for the hotly debated bill.

The provision ensures that all racehorses are depreciated over three years for tax purposes, regardless of when the horses start training. The current tax code doesn’t reflect the entire length of a horse’s racing life, according to a National Thoroughbred Racing Association analysis of Jockey Club racing data.

“While many Americans identify the horse industry as one of Kentucky’s signature industries, its economic impact extends well beyond the borders of the commonwealth,” McConnell said.

What a great leader!

Oil and gasoline

Lousy politicians!

Gas prices soaring? It’s because oil companies want “excess profits,” as Barack Obama puts it. Right?

Wrong. The truth is more complicated.

Let’s look to California driving capital of the world. Officials there watch gas prices carefully. During March and April, a state analysis found that “distribution costs, marketing costs and profits” made up about 10 cents of the cost of a gallon of gasoline, which ranged from $3.46 to $3.89. Notice that that dime is less than 3 percent of the total retail cost, and profits account for only part of it. So those “excess profits” are actually well below 3 percent of retail costs.

Of course, that’s little comfort to tapped-out drivers. And the big oil companies are certainly making big money — Exxon Mobil alone earned $40.6 billion last year. But such profits follow naturally when a company sells a product that so many people want to buy. Some recent history offers us a bit of perspective.

In 1998, a recession in Asia created an oil glut. Prices plunged to historic lows (near $10 a barrel), and American drivers reaped the benefits, with gas dipping below $1 per gallon. So how did Exxon fare in those days of low prices?

According to Forbes magazine, Exxon earned more in profits than any other American company in 1998. Sales increased 3 percent over 1997 and profits jumped 12.6 percent, to $8.4 billion. Again, remember: Oil was remarkably cheap that year, yet Exxon earned double-digit profits. Few complained then.

The lesson is simple: When a company sells a product people want, it tends to make money, in good times and in bad. For years, oil has remained a product that Americans want — and today’s high prices have done little to change that.

A few months ago the FTC said this about high gas prices: “All of the increase can be attributed to increased crude oil costs, because gasoline inventories are as ample as they have been for several years, gasoline consumption is declining to a near-record extent, and refining margins — the difference between the cost of crude oil and the wholesale price of gasoline — have fallen.”

So who’s making the big money? The countries that produce crude oil. Crude represents more than half of the cost of each gallon of gasoline sold. Federal, state and local taxes represent another fifth.

Yet some insist we punish “big oil.” During one presidential debate, Hillary Clinton announced that “the oil companies reported the highest profits in the history of the world. I want to take those profits, and I want to put them into a strategic energy fund.”

But confiscating oil company profits is a lousy idea. Profits are what keep them in business. It allows them to invest in refining and delivery systems, and search for new deposits of petroleum. Profits fuel our capitalist system as surely as petroleum fuels our national economy. Plus, “big oil” returns billions to stockholders through dividends, and millions of Americans own its stock through their mutual funds and 401(k)s.

The best way to cut prices in the long run would be to increase supplies. Policymakers could help do this if they would allow drilling off-shore and in a tiny section of Alaska’s barren Artic National Wildlife Refuge.

It makes no sense to keep so much domestic oil off-limits, especially with prices climbing. As long as we do it, we’ll pay more than we need to for each gallon of gasoline and keep sending big profits overseas. Let’s stop stalling — and start drilling.

In support of Big Oil

Where is it written that the cost for a product or service should be frozen in place and in time, never to rise again, or to rise at a pace commensurate with our incomes? People who think this way know little to nothing about supply and demand and less than nothing about the profit motive. That’s because at least three generations have been raised on the notion of entitlement, and when one feels entitled to something, one believes someone else should pay.

Senate Democrats last week sought to ingratiate themselves with voters, while doing nothing to produce more energy, with a familiar attack on “big oil.” They want to repeal $17 billion in tax breaks for the oil companies over 10 years and on top of that impose a windfall profit tax on companies that don’t invest in new energy sources. This is political expediency at its worst.

It is a myth that oil, no, energy companies are not investing in and exploring alternative resources.  Chevron alone has spent over $20B on alternative investments.  ConocoPhillips close to the same. 

President Bush’s trip this week to Saudi Arabia is “highly embarrassing” because he is “calling on the Saudis to produce more oil when we are not doing it ourselves.” The last refinery built in America was in 1976. Tighter government regulations are the main reason. That’s how unserious we are about our energy “crisis.”

There would be plenty of oil available to the United States if the oil companies were allowed to get it: Eighty-five percent of offshore oil is off-limits. Responding to objections to offshore drilling by environmentalists and their allies in Congress, it should be noted that some of the strongest pro-environment nations in Europe – Denmark, Norway, the United Kingdom – lease offshore locations for oil exploration. The technology has become so good that during Hurricanes Katrina and Rita, one thousand offshore wells were destroyed (in the Gulf of Mexico), but not one leaked. Australia has allowed offshore drilling for 40 years without any environmental damage.

In addition to the sinking value of the dollar, here is the main problem: According to the Department of Energy, U.S. oil production has fallen approximately 40 percent since 1985, while the consumption of oil has grown by more than 30 percent.

According to government estimates, there is enough oil in areas accessible to America – 112 billion barrels – to power more than 60 million cars for 60 years. The Outer Continental Shelf alone contains an estimated 86 billion barrels of oil and 420 trillion cubic feet of natural gas. Had President Clinton not vetoed exploration in the Arctic National Wildlife Refuge (ANWR) in 1995, when oil was $19 a barrel, America would currently be receiving more than 1 million barrels a day domestically, all of it taken by better technology than existed more than 30 years ago. That was when the Alaskan pipeline was built despite protests from environmentalists who claimed it would destroy the caribou. It didn’t, but the environmentalists are back with the same discredited arguments. Because most of the oil remains “off-limits,” we are becoming more dependent on foreign oil.

No, we can’t “drill our way out” of our addiction to oil, but we can make the transition to other energy sources easier while lessening our dependence on foreign oil and propping up dictators who use our money to subsidize terrorists. A slow transition will also give us time to consider more fuel-efficient cars and greater use of public transportation, even bicycles for short trips. Bikes would help more of us lose weight and get in shape. A friend bikes to work every day, saving gas, car payments, insurance and repair costs.

The specter of a president of the United States going hat-in-hand to Saudi Arabia to plead for more (and more expensive) oil from the dictatorship that underwrites an extreme form of Islam that is out to kill us is obscene. President Bush ought to be rallying Americans, not embracing people who don’t allow women to drive cars.

Some oil data

According to the US Department of Energy, US oil production has fallen approximately 40% since 1985, while US consumption has grown more than 30%.  So in real barrels, US oil production is now below five million barrels a day.  It was approximately nine million barrels a day in 1985. 

We have cut our production in half.  And you can see one of the results of this is the price that we are paying for oil-related products today.  At the same time, while in the last 23 years we have cut our production in half, the government has put billions of barrels of domestic oil and natural gas off limits to domestic exploration.  According to federal government estimates, there is enough oil in the areas that we now place off limits, 112 billion barrels to power more than 60 million cars for 60 years without importing a drop.  However, this domestic supply is off limits.

Had President Clinton not vetoed exploration in ANWR in 1995 — oil was $19 a barrel in 1995 — America would currently be receiving over a million barrels a day from Alaska.  Experts estimate that ANWR contains 5.6 to 16 billion barrels of recoverable oil.  The Outer Continental Shelf in the United States contains over 44 billion barrels of oil, and 232 trillion cubic feet of natural gas.  Eighty-five percent of the outer continental shelf is off limits to domestic exploration.  In the Gulf of Mexico, there is enough natural gas to heat 60 million homes for another 160 years. 

Just some very brief and high level informaiton to share.  The information out there about new possible supplies of oil and other energy is vast.  But this is a good start to spur conversation and discussion.