Reflections From a Murky Pond

It seems that even Obama can sense when the winds have shifted and his campaign promises are best left lying in gutter. With oil prices now under $50 a barrel for light crude – down from a high of $147 during last July – Obama has decided not to implement his windfall profits tax upon US oil companies.

CHICAGO/WASHINGTON (Reuters):

President-elect Barack Obama is not planning to implement a windfall profit tax on oil companies because prices have dropped below $80 a barrel, an aide said on Tuesday…

Obama, who signaled early in his campaign for the White House that he would take an active approach to oil markets as president, had planned to use the revenue from a windfall profits tax to fund a tax rebate for low- and middle-income families struggling with high energy prices.

The environmentalists in specific and the Left in general are gnashing their teeth over what they perceive as a betrayal by their Messiah. Meanwhile the oil companies are breathing a sigh of relief and crowing just a bit. Both groups are to some extent acting like idiots.

Let’s look at this from a pragmatic point of view. President-elect Obama is a politician – one raised in Chicago’s school of political street fighting – with political goals. It does not serve his purposes to use a tax to steal money from the oil companies when there’s no available money to be had. This is no way indicates that Obama doesn’t want to take money from the oil companies and use it for his own aims. If and when oil prices climb again, he’ll be more than willing to snatch as much as he can get away with.

There’s also another point that the environmental types should remember – Obama’s proposed windfall profits tax upon the oil companies wasn’t intended to be spent on green power; it was meant to be spent on an “energy rebate” ($500 to individual workers, $1,000 to families). With the drop in fuel / energy costs, this rebate is no longer needed.

On the other hand, the oil companies need to remember that Obama is no where’s near being their friend. They should keep it firmly in mind that this is a stay of execution, not a pardon. Obama and the Left have already tried them and found them guilty of the worst crime in the Left’s view of America – wealth. Obama and his constituents and helpers – Pelosi comes quickly to mind – will come for the oil companies sooner or later.

As I said, the winds have shifted – but it’s mostly nothing more than hot air.

Tags: Big Oil | Capitalism | Economy | Obama | Politics | Socialism | Taxes | The Environment

This entry was posted on Thursday, December 4th, 2008 at 7:13 am and is filed under Politics, The Environment. You can skip to the end and leave a response. Pinging is currently not allowed.

Presidential hopeful, Sen. Barack Obama has published his “Emergency Economic Plan.” Given the current perceived state of the US economy, this is neither surprising or unwarranted in and of itself. Sadly but still not surprisingly, as with many politicians published plans during an election cycle, Obama’s plan is more firmly based in pandering to the voters than to addressing the issues at hand.

Obama “Emergency Economic Plan” comes in two parts. The first part , which is the only one I can really speak to, is an “energy rebate” ($500 to individual workers, $1,000 to families) he would like to send out as soon as this upcoming fall. These “rebates” would be fully paid for with five years of a windfall profits tax on record oil company profits!

Obama describes this in his plan as “Forcing big oil companies to take a reasonable share of their record breaking windfall profits and use it to help struggling families with direct relief.”

OK, let’s start with what are Windfall Profits? They’re technically defined as “profits that occurs unexpectedly as a consequence of some event not controlled by those who profit from it.” So essentially Obama is saying that the US federal government should enact legislation to ensure that companies – at least certain companies – are forced to share their unexpected gains with the public at large.

Where does a profit margin become excessive? Below is a listing of the average profit margins for some of the major economic sectors in the US.

• Beverages & Tobacco: 19.10%
• Pharmaceuticals: 18.40%
• Electronics & appliances: 14.50%
• Computers: 13.70%
• Chemicals: 12.70%
• Manufacturing: 8.90%
• Oil & Gas: 8.30%
• Aerospace: 8.20%
• Machinery: 8.20%

That’s right, Oil & Gas ranked 7 out of 9 by sector when it came to profit margins, and maintained profit margins of less than half of that maintained by Beverages & Tobacco and Pharmaceuticals. Yet, Obama and a bunch of other Democrats aren’t gunning for other sectors with larger profit margins and margins more sustainable over the course of years.

Why would Obama want to take money away from a sector of American industry that maintains less than a 10% profit margin during most years? Have the oil companies been engaging in profiteering or market manipulation? No.

Obama’s plan as published doesn’t even try to hide his intent or reasoning. He makes no claim that that “Big Oil” is engaged in profiteering or any other form of market manipulation. In his plan Obama even states that the oil companies committed no wrong, but had benefited from “changes in the price of oil because of factors like supplies in the Middle East, demand in Asia, and disruptions and distortions in the oil market.” So Obama isn’t for regulation of profits; he’s for commandeering profits from companies that experience good fortune in their business endeavors.

This idea sounds more like something that would be enacted into law in some socialist nation like Venezuela than the US. Oh wait – Venezuelan President Hugo Chavez did enact almost identical legislation in April of this year. Less than a month later House Democrats tried to get that law enacted here in the US, but were blocked in the Senate. Now Obama is giving it another shot – or at least acting like he is.

Tags: Big Oil | Democracy | Democrats | Economy | Liberals | Obama | Politics

This entry was posted on Monday, August 4th, 2008 at 1:56 pm and is filed under 2008 Election, Society. You can skip to the end and leave a response. Pinging is currently not allowed.