The retail market is competitive, and Exxon, for example, is but one-tenth of the total U.S. market. They get a 7 percent to 8 percent return on investment and face a 45 percent to 46 percent marginal tax rate on corporate income.
Our inflexible environmental rules require ethanol in California and some other states, and ethanol is heavily subsidized but without enough refining capacity, so ethanol prices double and Congress slaps a 54-cent tariff on imported ethanol. Dumb as that is, its even dumber to slap windfall taxes on profits, which (a) raises prices further and (b) cuts back the investment in new production and reduces the search for new oil deposits.
Two-thirds of our domestic oil companies' profits come from overseas, but 80 percent to 85 percent of the shareholders, i.e. owners, are in the United States. Exxon, Chevron and Conoco-Phillips have been investigated more than a dozen times since the 1970s, and each time have been cleared by either the FTC or the Justice Department.
What the price mechanism does in a market economy is direct scarce resources to those areas of the economy that consumers desire and/or need. As prices rise, capital gets allocated to the demands and desires of the market, and much of those "obscene" profits go into looking for more oil, expanding refinery capacity and encouraging investment in alternative sources of energy - all necessary in this increasingly flattened world, economically speaking.
Distorting markets by windfall profit taxes, price controls, extreme environmental regulation and poor policies like rebates don't work and will only exacerbate the problems we are currently experiencing. Republicans should defend the only system of economic policy that is capable of producing more and better energy while reducing the incidence of poverty. Free markets, free people, free enterprise and free trade have created more wealth, more jobs and ended more poverty for more people than any system in the history of the world.