Thursday, May 04, 2006

Dick Durbin: Moron of the Year

I hate stupid people. Really. They drive me NUTS.

As a follow up to the oil post I did a few days ago, here comes a quote for you, courtesy of Meet the Press:

SEN. DURBIN: Am I the only one of your guests here that think that profit taking is a problem?

I hope so. Profits are kinda important to a continuing, successful business. No profits, no business.

I mean, I understand the basic laws of supply and demand. I understand that if the input costs have gone up, it's going to reduce your, your profitability.

A shifting supply curve will cause a change in the equilibrium of a model. There have been a whole LOT of items that have shifted the supply curve (laid out here by me and in commentary) while also increasing demand. Apparently the dear Senator does not understand an equilibrium point, and thusly, said "basic" laws.

But here we have the most enormous profits in the history of the United States of America in business. The equivalent of $1,000 per household in America for profits.

Let's see: $1000 in profits a year. A little under $20 per week per household. The profit margins based on current prices, supply costs, are not too much higher than before. It may seem exacerbated based on many other factors which ol' Dickie really doesn't want to think may be serious factors. Why worry about Nigeria, Venezuela, Bolivia, and Iran when you have Chimpy McBushitler? Everything would just be rosy and peachy keen without all dem evil Republikans.

All of the market factors you described may suggest that the product is going to be more expensive to sell, but they don't forgive what I think is an outrageous profit taking by this industry.

Translation: You may be right, but I don't care. La la la la la la. The Senator is entitiled to have his opinion - even if it is an extremely stupid one. Not to mention his last sentence contradicts his first sentence, talking about how profitability will be reduced.

Damn moonbat.

(BTW, nice job to Illinois for sending this douchebag to the Senate, Then again, after so many Daley terms, what can you expect?)

Anyway, back to the lecture at hand. I don't think these numbers, from the first quarter of 2006 for ExxonMobil (one of the most reviled lately), help Dickie's argument (thanks to here):

US Revenue: $8.4 Billion
US Earnings (profits): $2.3 Billion
US Taxes Paid: $3.7 Billion

Also, Year-to Year EPS was up about 17%. Gas prices, however, have risen about 30%. That's just a bit contradictory to passing on ALL the costs as Sen. Durbin tried to state. Whaddaya know, XOM's profitability went down.


Might be a little difficult to invest in alternative energy, or in increasing oil supply, if all your profits, and then some, go to the IRS and the states. 44% in taxes is just a bit much. Once again it may very well be that In this present crisis, government is not the solution to the problem, government is the problem!

Heaven forbid anyone suggest cutting or eliminating federal and state gas taxes, or corporate income taxes. Oh no, that would just help the wealthy. Not like those would be trickled down to customers or anything. It's not like a lower price would, you know, encourage people to use MORE of the product and thus INCREASE the company's margins.

Yeah, it's easy to pile onto the oil companies, and yes, income has gone up. In this company's case, though, a good amount of the cost increases are actually NOT being passed on to customers. And this is the "worst" company of the Big Oil lot.

I'm not trying to apologize for them, or even let them off based on what I wrote before. Just saying - there are a lot of factors at work. Somehow, I'm pretty sure if the tax burden were decreased somewhat, it would help for 1) passing savings on partially to customers, and 2) allowing investment in oil search/drilling or in refining alternative sources to use down the line.

A word for Sen. Durbin: It is better to keep your mouth shut and let people think you are a fool, rather than open your mouth and remove all doubt. Please, JUST SHUT UP.

I'm just glad I was able to find a way to link to this site.

Maybe it's time we started thinking about why we got put in charge of everything in the first place, before this government turned into a bloated, new-age Nixonian bureaucracy and we actually had to consider the possibility of a moron such as Dick Durbin becoming a Majority Party Leader.


Jeff said...

Here's an April 2006 breakdown that I found of the components of the price of a gallon of gasoline:

54% - price of crude
21% - cost of refining
2% - cost of transportation
17% - taxes
6% - profit to refiner, transporter, and retailer

There are other smaller factors that are overlooked here (such as marketing and how we pay with our credit cards who now end up taking a cut too) but I think it seems pretty accurate.

Firstly, I don't think Senator Durbin is helping anyone when he wants the Exxons of the world to give back a share of their share of the small 6% profit margin.

But I also don't think going after the 17% tax margin is the way to go either. Gas taxes are here to stay. In some places they're not even that much higher than what ordinary sales tax amounts to. If we're going to eliminate taxes, I can think of better ones than this.

Instead, this is clearly the time for a real US energy policy that attacks the 2 big dogs on this list - the 54% cost for the crude oil and the 21% cost of refining it.

And as we have seen in the past five years, we can debate the pros and cons of these methods endlessly - such as the Canadian oil sands, more Gulf offshore drilling, nuclear and/or coal power easing our need for oil in our power plants, no new major US oil refinery being built since 1976, etc.

But if even an oil man like Bush can't (or won't) do something to address the supply side of the equation, then maybe it's time to do something about the demand side.

Personally, I don't think it's any greater an offense on my freedom for the government to tell me what kind of guns I can and cannot own than for the government to tell me what kind of cars I can and cannot drive. It is no greater offense for the government to tell me where I can or cannot smoke (btw, I quit 15 mos ago) nor for the government to claimn that it may now seize my property for any reason at all and merely reimburse me the fair market value of the land as I used it.

My point is, fellow conservatives, if we can't do something about the supply, I'm real close to giving in to the Al Gores of the world and agreeing to do something about the demand.

TSL said...

Excellent debate, gentleman. And thanks to Mikey for allowing me to utilize the Economics I'm studying for tomorrow's final!

The "solutions" (such as they are) to the Big Oil problem involve tackling both supply and the cost of supply (sorry, Jeff).

1) The taxes are, as Mikey notes, externalities that shift the supply curve and affect the market equilibrium. Eliminating those taxes (or, at least, greatly diminshing them) would help move the EQ back a bit, increasing both Q and P. Unfortunately, those in the government have NO INTEREST WHATSOEVER in actually doing this, because it will not only remove a source of funding but also increase usage, which would be (in their minds) back for the environment.

2) So how else can you increase supply? Drill ANWR, build nuclear power plants, erect windmills (!), build refineries, and, as some Quatar minister said, tell everyone to SHUT THE HELL UP. This is all crazy speculation driven by hysteria, and it needs to be shouted down by responsible parties (sadly, they may not exist).

Again, though, any of these moves will result in an increase in supply, so probably that has a lot to do with why nobody actually does anything.

Finally, with respect to Peak Oil or drying up the supply, it won't happen. In 1906 we were riding horses. 100 years from now we likely won't even be using petrochemicals...who knows what the future and technological innocation holds?

TSL said...

duh, I meant "decreasing P" above when talking about the curves.

Paul Zummo said...

I started posting a comment, but it got too long, so just head on over to my place to see the post I put up on this issue.

Francase said...

I think going after the taxation would allow some of the savings to be passed on to the consumer (so politicians can crow about that) and allow companies such as CVX, XOM, COP, etc. to focus more on energy development, both current sources and in developing new sources. Short-ter, demand increases, but now there is investment capital available to work, long-term, on building the supply of oil or alternative fuels. Additional investment could allow companies to figure out a way to make those alternatives mroe affordable.

That's the short-term answer. Long-term, easing the supply crunch is not as easy. Finding new sources of supply is not easy - most drillers are drilling much more now to achieve the same output of oil. better access to current supplies of oil will require a lot of geopolitical change whether it is ANWR, dictators in Venezuela, building a refinery (which falls under NIMBY), etc.

Again, everything falls under supply. As for controlling demand, aside from developing alternative fuels there isn't really anything to inhibit demand aside from a rising P, which is what we are trying to avoid.

I'm glad this helped with your studying - but don't blame me if you fail the final :)

Jeff said...

OK, you tax cutters. But remember, look at my original numbers. When you talk about cutting corporate taxes on Oil you're only addressing a mere percentage of the 6% cut of each gallon of gas. That will not solve the problem - let's focus on the other 94%.

Jeff said...

As for controlling demand, aside from developing alternative fuels there isn't really anything to inhibit demand

One follow up to this comment. I'm not saying it's my solution for right now, but there are indeed other ways to control demand. Al Gore wrote his manifesto Earth in the Balance a decade ago with all sorts of ideas to control demand.

There's no reason federal laws couldn't be passed to mandate minimum miles/gallon requirements on new cars. The state interest is clearly high enough. Sure, we'll still have the old clunkers on the aftermarket. But we could stop people from driving new Silverados and Hummers for vanity if we really wanted to. And if you truly need that big truck for work....ok, get a permit and pay a tax.

Let's face it. We do these type of things in other areas of life already. It's just a mindset change. The big car has been part of the American dream for 60 years now. Maybe it's time for a change.