Windfall profits tax for big oil
One thing is certain, nearly everything the apologists for the profits of big oil companies say in defense of their massive profit is untrue. So when Congress refuses to rescind the huge tax breaks and royalty relief and subsidies they have given major oil companies, they excuse it by saying that they are necessary to “encourage” oil companies to continue to make big profits by pumping oil. Why anyone would think that a company that was turning huge windfall profits for a highly overpriced product that everyone needs, would need an additional, congressionally inspired tax incentive to continue doing it, is beyond explanation. They insist this is necessary to defray the risk of their initial investment, as if risk were not a legitimate cost of doing business in a free market economy and one that every other wage earner, taxpayer and small business owner in America was not forced to deal with every day.
At the same time, these politicians and other assorted pocket dwellers of the great oil conglomerates insist that to impose a windfall profits tax on these locked in earnings can’t be entertained because that would run counter to the principles of a free market economy. Meaning, that the very support of free markets they subvert in the first instance for the benefit of big oil they invoke in the second instance to the benefit of big oil, even though both policies work to the detriment of the interests of the public.
Let’s briefly recap. When it is a matter of plundering our natural resources to the unjust advantage of their friends, Congress is eager to thwart the free market system to eliminate “risks”. Yet when the public seeks redress from the exorbitant profits which then accrue to these monopolies, Congress piously intones the free market mantra to insist that they would like to help the public with its problems but just can’t possibly. The only denominator common to this tergiversation is that whatever fills Congressional coffers is good and whatever helps the public is bad or, if you are keeping track on your fingers – OPEC and Congress two, the public zero.
The difference between the interests of the nation and the workings of Congress is, obviously, bribery. The lesson here is, if you are a true, cash giving friend of Congress, a free market and the attendant risks connected with it are thought to be too much of an additional burden for a company already laboring under record setting profits to bear. This logic would be quite dishonest enough even if these multinational corporations’ record profits were being honestly achieved but, naturally, they are not.
The extraordinary flaw in all this is the stunning assertion that the oil business has anything whatsoever in common with a free market in the first place. It’s pricing is, after all, based on a cartel. Congress should know this. OPEC has the word cartel carved on its letterhead. They have highly publicized meetings to set artificially low production schedules designed to keep oil prices artificially high.
Then at what point in the Atlantic do rigged oil profits, stemming from a corrupt international commodity conspiracy and cartel, change over and become honest free market profits? The answer is never. All these extreme, record oil company profits, regardless of where the oil is originally drilled, are fungible, tainted fruit dropped from the same poisoned tree. You can no more superimpose a free market atop a cartel and make it legitimate, as American oil companies propose they do, any more than you can dress an orangutan in a business suit and call him CEO, or grow roses on a lemon tree.
The oil industry is not a part of a free market system at all but, especially when you consider who comprises the cartel, its mortal enemy (and no good friend of democracy either). To suggest otherwise is to say that a mere numbers runner is just a private entrepreneur, somehow separate from the mafia boss he works for. It seems curious that Congress tries to blur this distinction. One is left to conclude by their curious myopia that the blinding propensities of greed on the conscience of a congressman can never be underestimated.
But if the blatant corruption and manipulation of the cartel based structure of the oil markets were not enough to question their motives, how the multi-national oil companies operate in America should certainly seal the deal. Though they have moved farther downstream from the source of the polluted spring and are not directly engaged in the corrupt pricing scheme of the oil market, they profit just as directly from it and then create artificial shortages in this country over and above the cartel’s prices to inflate already illegally high prices even higher. Perhaps this should not inspire malice toward them but neither should it blind us to the inherent guilt of their associations or the harm their dealings are doing to our economy.
Why, for instance, even though they are awash in record profits, don’t major oil companies in this country operate as every other business in the world would, to increase their refining capacity to a level to meet every foreseeable contingency and level of demand? Simply because keeping supplies tight and refining capacity limited allows them to squeeze the market with artificial blockages, delays and shortfalls –which occur with suspicious and superfluous regularity every year for one reason or another – and raise prices again on top of OPEC’s. Put simply, American oil companies create artificial delays and shortfalls on top of the artificial shortages engineered by OPEC. This has the effect of ripping us off for the same barrel of oil twice.
This is exactly how Enron and other corrupt companies colluded to invent the California energy crisis in the early days of the Bush Administration while the government (the only entity with the power and authority to do anything to stop them) conveniently looked the other way and let them do it, fiddling while Sacramento burned. But if George Bush can play a reasonable facsimile of Nero now and then, then in the face of this firestorm of outrageous world-wide market manipulation, Congress must be the largest and deafest string orchestra in history.
In general, the intentions of the oil companies are best understood from their results rather than from their intentionally obscured designs. If the petroleum market were actually a free market, for instance, an oil company would be reckless to not secure adequate supply to service its customers under any crisis which might arise. It would be managerial suicide to do anything else. In a competitive market if a company misjudges its inventories it will soon lose its customer base and its market share to aggressive competitors who rush in to fill the void.
Unfortunately, because the American oil market is no more a free market than the international oil market is, there are never competitive voids to fill or aggressors to fill them. This means that the less efficient the multinational oil companies which operate in America are in delivering oil to market in a timely fashion the more profitable they become. Since the incentive in this model works exactly contrary to what would be the case in a free and competitive market, it is obviously neither, and collusion and corruption may be deduced as the cause.
Oil companies do not build enough refining capacity in this country not because mean environmentalists won’t let them, which is what they fatuously insist, but because it profits them not to. Since environmentalists and politicians have never had the will or ability to keep them from the doing the wrong things when it served their purposes, it seems more than dubious for oil companies to claim that these same entities have the power, much less the motivation, to prevent them from doing the right ones even in the historically unlikely event they should ever decide they want to.
No, oil companies do not build refineries because they can’t afford to, but with malign intent, because it pays them windfall profits not to. This allows them to keep their inventories short and create false blockages of the supply of refined oil products so they may manipulate market prices at will. It enables them to take advantage of the cover OPEC provides them to do to us what OPEC does to the world and secretly construct a domestic oil cartel atop the foreign one.
Of course, now that oil prices are again on the rise, there are rumblings of rumors of investigations that Congress and the president are going to undertake. These will end the way all such half-hearted, preordained, phony endeavors predictably end. They will investigate in all the usual places for all the usual things which are not there, for a paper trail which never existed and find nothing. They will search high and low for a well publicized meeting of all the oil heads gathered somewhere in one room setting prices (just as Adam Smith said they would) replete with notes, tapes, graphs, e-mails, photos and signed documents and, predictably, find that that such a meeting never convened.
Months later, when interest has dulled, Congress will pronounce that there is no evidence of collusion and price fixing in the system of delivering refined petroleum products to the American public, even though everyone knows better. The petroleum industry in America is, in fact, composed of nothing but systemic collusion and price fixing and artificial shortages over and above the shortages and price fixing and collusion of OPEC. There is almost no other reason for it to be designed to work as inefficiently as it does.
Yet after all the horses have left the barn our intrepid leaders will investigate and but for the disturbing stampede at the barn door, the echoing whinnies and thundering of hooves ringing in their ears, all the half eaten hay bales and the unaccountable presence of an abundance of reeking horse manure they find themselves standing neck deep in everywhere, they will solemnly aver that no firm evidence that horses had ever congregated in that barn exists anywhere.
Well, OK, so how do we usually know that something happened when the evidence for it has been so systematically and assiduously destroyed? One needs only look at how a system works and who it profits to surmise its intent. In other words, one way to tell whether a criminal has been at work is not necessarily to catch him in the act of the burglary but in the red-handed possession of all the loot from the house broken into. When a person is caught with a large amount of unaccounted for wealth, based on no discernable income or inheritance or recent winning of the lottery in his possession, there is something wrong. Money doesn’t materialize from nowhere (God knows, we’ve all tried), and when reasonable people decide that no legitimate source can be found for its accumulation it can not be counted credible to dismiss this as merely a coincidence of an inexplicable nature.
So it is with the new robber barons of big oil, the burden is on them to justify their vast profits not on us to unravel the intricacies of how they acquired them. If your neighbor has your car in his garage you needn’t figure out how it got there to demand to have it returned. When an oil company works no harder to achieve, acquire and refine its supplies into product and there is no discernible drop in inventories or supply to demand, there must be other factors to account for the wild fluctuations and inflated prices and their concomitant profits. Generally, in the real world, it is enough to see who is in possession of the stolen goods for them to be judged guilty of the crime of having illegally acquired them. And then how can it be anything but a national endorsement and approval of fraudulent behavior not to return the purloined property to its rightful owners?
We know there are actual market fluctuations and pressures and legitimate profits based on a variety of market forces, both natural and geopolitical, to account for some market speculation. But we also know that these in no way can account for all of the huge run-ups in prices and record profits these companies are amassing. We also know that the price we pay for gas at the pump is the end result of an extraordinary amount of fraud and market manipulation by a system of illegal cartels and a world wide conspiracy to corner the market for a vital commodity on a scale never before seen in world history.
Therefore, unless you are willing to support the underlying economic legitimacy of a foreign cartel fixing prices in preference to open markets, a significant portion of these record oil company profits must be judged to be illegitimate. It is enough to know that our money has wound up in someone else’s pockets unlawfully for the law to intervene to return it to its rightful owners. No questions asked.
Faced with such a situation the IRS would certainly, at minimum, even if they couldn’t trace the exact source or know which collection of nefarious acts had led to the accumulation of such large and unaccountable profits, be justified in the confiscation of a proportion of the excess money back to the public from whom it was taken with back taxes and penalties assessed.
If Congress can’t ensure that this out of control price gouging stops, they at least need to insulate us from the profiteering tactics of this insidious cartel, and fight its effects by redirecting the workings of this anti-free market and anti-American industry operating in our midst to some future public good. They need to relieve us of this tyranny over us, not to continue their participation in it.
If you agree that it is wrong for government to haphazardly intervene in the manipulation of free markets for unjust advantage then you have to conclude that it is mandatory for it to intervene in a corrupt market to alleviate its unfair advantages over us. This is the side of the argument the politicians need to return to after having sided with OPEC for so long against the interests of their own people. A windfall profits tax is actually the only sane and acceptable blow in favor of a free market economy and a free and healthy American economic future that oru political leaders could enact.
The only simple and fair and efficacious response to corruption this complex and comprehensive is to pass retroactive windfall profits taxes on the multinational oil conglomerates that do business in the U.S. Some of it, after all is our own oil, our own precious natural resources, which a bribed and supine Congress over time has literally paid these companies to take from us at less than cost and sell back to us at wildly exorbitant prices. A barrel of American oil may cost an American company $20 from ground to pump. After it has been subjected to the world market, and all of our worst enemies in the world have inflated its costs and profited at our expense, it comes back to us marked up to $70. And Congress suggests we need to establish more taxpayer funded “incentives” for them to keep doing this to us.
This is like contracting with someone to harvest your wheat field at $1 a bushel only to watch them turn around and charge you $100 for a loaf of bread. Why is it to our benefit to get next to nothing from these companies for our own natural resources, only for the privilege of buying them back at OPEC plus prices later? This is not economic independence; it is economic servility to pay far more for our own scarce natural resources than we will receive back in benefit from selling them.
They are making beggars of us in our own country, as Congress and the multi-nationals are treating us the way colonizers have always treated third world countries.
Which brings us to another argument the defenders of the OPEC based oil industry use against a windfall profits tax. They claim that when tried in the past it suppressed exploration for new sources of oil in the United States. So? Our oil should not be sold cheap and if it is then to be sold back to us at government unregulated and out of control, OPEC inflated profits in support of a corrupt world market for oil and against the consumers of this country, how does this possibly benefit us? No, this argument is just another phony one. We can never drill our way to energy independence and to suggest otherwise is a lie put forward by those with a vested interest in maintaining the oil cartel’s dominion over us.
To redistribute the proceeds of the windfall profits tax, it should be tightly earmarked to scientific research and serious investment in alternative sources of energy, a bulking up of the strategic oil reserve and relief to those hardest hit by the effects of predatory prices. Exactly unlike current policy, this will result in plethora of good. It will, unlike the drill our way out of oil dependency hole they have drilled us into argument referred to above, finally allow us to make the kind of profound national commitment necessary to actually begin to wean ourselves off oil addiction and be the first step on the way to real energy independence. This is something the politicians always speak of in campaigns and never do anything in practice to achieve.
Conservation, self-evidently, is the single most advantageous thing we can do today to loosen the hold of big oil on us. Proceeds from a windfall profits tax, properly applied, could yield significant demonstrable dividends. If, as Dick Cheney insists, this also makes us more “virtuous” (only members of this administration could use the word virtue as a pejorative) so be it. In addition, a windfall profits tax will provide some leverage on the oil companies to be more accountable to lower and fairer prices at home and enable us to redress a few of the imbalances this corrupt process of price fixing is wreaking on the balance of power in the world.
The solution of a windfall profits tax is elegant and just. The costs of resolving the problem of oil shortages will not only be assessed against those most responsible for creating the problems but the resultant policies will pay for themselves and profit us over and above their costs. OPEC and their minions have been robbing us for years, it is only right that they should be dunned to help pay for their own diminishment. Self evidently, the better energy policy which will result will not serve as its own reward, but will eventually help undercut the criminal oil cartel and, even if only just symbolically at the start, be a blow in favor of the reestablishment of free markets in the world. And it will represent the first efforts by our do-nothing politicians to finally do something to fight the more and more apparent problem of global warming, something until recently, just like price fixing, they have been too craven to even admit the existence of.
However, don’t hold your breath. This Congress is far more addicted to the money which flows their way via kickbacks from big oil than the American people are to its everyday usage. They are the cynical middle men that profit in campaign graft at both ends of the corrupt bargain. When George Bush said, “We are addicted to oil,” he didn’t mean us, he meant himself. What American wouldn’t readily abandon shooting up oil for a better alternative? He also said that this upsurge in oil prices was a “wake-up call.” In fact, the only ones who have been asleep on this issue are the do anything but the right thing Congress and their oil soaked pushers and handlers in this administration.
