Barack Obama’s new ad drags out the usual Democrat boogeyman, “Big Oil.” He says since the ’70s gas crisis, the only thing that has changed is that “Exxon is making $40 billion a year and we are paying $3.50 for gas.” Barack says “Big Oil” will pay a penalty for “windfall profits.”
So what are “windfall profits?” It’s a term that is thrown around quite a bit by liberals and I want to make sure everyone understands what they are talking about. A “windfall profit” is defined as:
- An unexpected profit arising from causes not controlled by the recipient.
- profit that occurs unexpectedly as a consequence of some event not controlled by those who profit from it
By definition, “Big Oil” has nothing to do with the profits they are currently enjoying, but they are being vilified for them. But oil companies don’t set the price. That is determined by the futures market.
Oil is a commodity, which, according to About.com:
…are agreements to buy and sell virtually anything except, for some reason, onions. The primary commodities that are traded are oil, gold and agricultural products. Since no one really wants to transport all those heavy materials, what is actually traded are commodities futures contracts or options. These are agreements to buy or sell at an agreed upon price on a specific date.
The price of oil is determined by two components. The first one is the “current supply in terms of output, especially the production quota set by OPEC.” The second part is “oil demand, particularly from the U.S. ”
Supply and demand. When the demand goes up, the price follows, which is why you see an increase in gas prices at the beginning of summer. But why are they so high now?
China and India. Behold, some headlines:
- China And India: A Rage For Oil
- Warning on Impact of China and India Oil Demand
- China and India driving oil demand (Video)
- India, China oil demand ‘frightening’: Aramco
- China, India to drive demand for oil through 2030 – MarketWatch
China and India have increased their demand so much, that “they have created a worrisome climate among the world’s energy producer.”
“This is the big gorilla. The demand by China and India together, if they continue to grow, it is quite substantial and it is frightening,” said Mazen I. Snobar, President and CEO of Aramco Services Co., which delivers Saudi oil to the United States.
So oil companies who have taken the time to invest in oil exploration, drilling, transportation, refining and employees to do all those tasks are really at the mercy of the market. The government, however, is not subjected to market forces. They simply take what they think is fair, hence we have candidates for president openly talking about wanting to “take those profits” or penalizing companies for “windfall profits.”
Today, for example, five oil executives sat before some Congressional blowhards who lambasted them for the current price of oil.
“On April Fool’s Day, the biggest joke of all is being played on American families by Big Oil,” Rep. Edward Markey, D-Mass., said, aiming his remarks at the five executives sitting shoulder-to-shoulder in a congressional hearing room.
Speaking of jokes, let’s take a look at who is making the most “profit” from “Big Oil.”
Ten years ago, oil companies recorded $9 billion dollars in profit (adjusted for inflation). Total 1998 gasoline taxes collected by state and local governments?
$60.3 billion.
Ten years ago, the government collected six times as much profit from gasoline than the oil companies did, and they didn’t lift a finger to produce the gas.
In 2004, oil prices were much higher and oil companies were making higher profits. The companies made a profit of $42.6 billion, but the government still cleared more, coming in at $58.4 billion.
In fact, “since 1977, there have been only three years (1980, 1981, and 1982) in which domestic oil industry profits exceeded government gas tax collections.”
When you adjust for inflation, oil companies have collected $643 billion in profits since 1977. The government has more than doubled that, collecting $1.34 trillion.
That is just a tax on gasoline, the tax you and I pay at the pump. The oil companies also have to pay taxes.
In 2007, ExxonMobil posted an impressive profit of $40 billion dollars, and the Democrats have let everyone they can know about it. But they don’t mention how much they paid in taxes. They never talk about the “$105 billion in taxes in 2007…more than two-and-a-half times as much as it made in profit.”
And you thought your taxes were awful.
What is worse is the Democrat Congress just increased their taxes by $18 billion. Well, everyone but Hugo Chavez and CITGO.
“[This bill] actually carves out tax breaks for Venezuelan dictator Hugo Chavez – courtesy of American taxpayers,” said House Minority Leader John Boehner (R-Ohio). “This is unacceptable, and the Democratic leadership is irresponsible for bringing the bill to the House floor.”
Another part of the problem Democrats won’t ever mention is the amount of land off limits to American oil companies. We have already identified supply as one of the components in the price of oil. But we have restricted 85% of the country’s coastal waters to drilling. 85 percent!
And if that number doesn’t irritate you, this definitely will – China is drilling in the Gulf of Mexico in areas we have restricted!
When Cuba hired China to drill for oil, Sen. Larry Craig said:
Because of current U.S. policy, U.S. companies are prohibited from developing oil fields that lie in Cuban waters and come within 50 miles of Florida.
However, Cuba is exploring and potentially developing these oil fields, estimated by the U.S. Geological Survey to possess more oil than the Alaska National Wildlife Refuge, and Cuba is partnering with China and other countries, such as Spain, France, and Canada.
Now, as we sit idly by, worried about development 100 miles from Florida, China is actively exploring oil fields 50 miles from Key West, Florida. U.S. companies are barred from working in this area because of U.S. policy . So, instead of allowing the most environmentally responsible companies to operate there and increase our domestic supply, China, who has a dismal environmental record, is sucking close, lucrative oil reserves dry.
It is the Democratic party who puts these areas off limits to American companies, and allows China to drill just 50 miles from our shores. It is also the Democrats (and a few Republicans, including John McCain) that continue to block access to the oil in the Alaskan National Wildlife Refuge.
According to a 1986 report, the ANWR holds a lot of oil:
Recoverable oil estimates ranges from 600 million barrels at the low end to 9.2 billion barrels at the high end. They also reported identifying 26 separate oil and gas prospects in the Coastal Plain that could each contain “super giant” fields (500 million barrels or more).
Another report “prepared by the USGS in 1998 (OFR 98-34), increased the estimate for technically recoverable mean crude oil resources.” Yet we cannot drill there because we may upset the habitat of the “caribou, polar bears, wolves, grizzly bears, muskoxen, and arctic foxes.”
To put this in perspective, the 1.5 million (out of 19.5 million) acres needed to drilling would be equal to opening a newspaper and laying it flat on a tennis court. Do you think you could play around that?
The Democrats hinder America’s ability to increase our own supply, yet with the help of the liberal media, turn the oil companies into a greedy, evil cabal behind the price of oil.
It’s enough to make a person think that the current high price of gas is by design, only the people pulling the strings for higher prices are liberals and environmentalists. It really isn’t that crazy. As National Public Radio reported:
You won’t hear it from Democrats on Capitol Hill, but higher gas prices are a good thing for the environment. Expensive gas should slow the use of cars, and the pollution they emit.
While China drills off Florida, oil lies untouched under the tundra of Alaska and environmentalists quietly celebrate the high cost of gasoline, Hillary, Barack and the rest of the Democratic party turn the heat up “Big Oil.”
If they didn’t, people might start to notice how responsible they are for the high price of oil.
UPDATE:
Turns out the China drilling off of Florida bit is not factual. Vice President Dick Cheney’s office issued the following statement after he made similar claims:
“It is our understanding that, although Cuba has leased out exploration blocks 60 miles off the coast of southern Florida, which is closer than American firms are allowed to operate in that area, no Chinese firm is drilling there.”
Only a matter of time…
