Oil Companies' "Obscene" Profits

Posted: May 02, 2008 12:14 PM
With gas prices at record highs, it's tempting to want to inflict on oil companies the same kind of pain we're feeling at the pump.  But  Investors' Business Daily explains why the political demagoguery about the "obscene" profits of the oil companies is so misguided.  Here's a snippet:

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.

What's more:

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.  . . .

Remember: Oil companies don't really pay "windfall profit" taxes, anyway. You do.

There's much more.  The whole thing is a must-read.