Congressman Proposes that Government Establish a "Reasonable Profits Board"

[Auburn85 432]

http://www.taxfoundation.org/blog/show/23183.html

The current high price of gas has led to a lot of crazy proposals from gas tax holidays to creating a tax deduction based upon energy consumption. But Rep. Paul Kanjorski's (D-PA) may top them all in terms of its stupidity. From the Times Leader, Kanjorski's plan would do the following:

• H.R. 5800 would tax industries’ windfall profits.

• The bill would set up a Reasonable Profits Board to determine when these companies’ profits are in excess, and then tax them on those windfall profits.

• As oil and gas companies’ windfall profits increase, so would the tax rate for those companies.

• Kanjorski said his legislation will encourage oil companies to lower prices to prevent them from receiving higher tax rates.

While Hillary Clinton may have failed ECON 101 along with John McCain, it appears as if Kanjorski may been enrolled in Marxism 450 at the time. In all honesty, nationalization of the oil industry (i.e. Venezuela) may be better than Kanjorski's ridiculous proposal.

One can make a case for taxing that portion of the return to capital that comes from economic rents, but Kanjorski has probably never even heard the term. An economist who backed such a tax would understand that such a tax is not going to lead to lower prices at the pump, just as economists are setting the record straight on the current gas tax holiday gimmick. Furthermore, the justification for taxing economic rents would apply to all sectors, not just petroleum.

Members of Congress and the American public need to understand that no tax cut or tax hike in the short-term is going to lower the prices at the pump. And any tax hike is going to raise prices in the long-term. Raising taxes on energy is not all bad, however. While any tax hike has its costs, raising taxes on gasoline does lead to less pollution (indirectly whereas a carbon tax is more direct) and greater funds for transportation (assuming they are spent in the right way which is unfortunately not always a safe assumption).

[Tigermike 3,055]

Brian Kennedy from the Institute for Energy Research has 10 questions for Senators:

1. Do you understand the fundamental economic principal of supply and demand for commodities pricing in the oil market?

2. Oil is a global commodity, bought and sold on the world market. Given that the nine largest private oil companies hold less than 5% of the entire world's proven oil reserves, isn't it more likely that the law of supply and demand is "manipulating" current prices than the five corporations represented at your witness table?

3. As a U.S. Senator, you have control over oil production on U.S. federal government lands. Taxpayers own these lands and the energy that lies beneath them, but 97% of the federal OCS and 94% of onshore government lands are not being used. Are you willing to help increase the world's supply of oil - and thus reduce the price of oil and gasoline - by allowing more U.S. energy to be produced from these lands?

4. The corporations represented at the hearing today produce roughly 2 million barrels of oil per day in America, for American consumers, with an American workforce. How many barrels of American oil, based on Energy Information Administration (EIA) estimates, have each of you voted to produce?

5. How often have each of you voted against supplying American consumers with 10.4 billion barrels of oil from ANWR, 85 billion barrels of oil from the Outer Continental Shelf (OCS), and 2 trillion barrels of oil shale in the West?

6. For those of you who have voted to restrict American energy supplies, especially during periods of increased demand, how are your actions any different than those that you have frequently ascribed to OPEC?

7. The sum of the American resources noted in question five is 2,095,400,000,000 barrels of oil. The total proven oil reserves in the entire world is 1.3 trillion barrels. Which number is bigger?

8. As the gap between supply and demand expands, oil prices increase, and oil company profits rise. What's the best way for oil company executives to send the entire U.S. Congress a "thank you" note for keeping energy supplies down and corporate profits up?

9. At today's prices, the United States is sending $1.5 billion dollars overseas - per day - to import oil from foreign countries. Do you think it would be a good idea to spend at least a fraction of that sum producing oil here in the United States?

10. When was the last time you filled up your own gas tank?

Don't look for any of the socialist left dims answer any of the questions.

[Auburn85 432]

you would also think that just every once in a while, maybe one out of every 10 articles concerning those $9billion! $10billion!! $11billion!!! in profits, that they could utter the two word phrase profit margin.

Instead they throw out those billion dollar figures to piss the people off. and then, off to congressional hearings we go.

[CCTAU 3,350]

Is there really an oil shortage. OPEC says that they have a little oil sitting around and that their customers are not asking for more. This means that someone else is controlling the price of oil and not just supply and demand. Speculators?

THE PEOPLE VS. EXXON

Matt Lauer, in all his journalistic brilliance, interviewed the CEO of ExxonMobil Rex Tillerson(LINK). Lauer displays not only his ignorance but the ignorance of Americans like "Elaine from Pennsylvania." Elaine sent an email into the show, which asked Mr. Tillerson. "'How can you justify the record profits you're making when people can't afford to put gas in their cars to go to work?'" First off, what does this question imply? It implies wealth envy. Elaine insinuates that oil companies have to justify their earnings in a free market society and that they are evil for making money when others are "suffering." So Tillerson's response is exactly what you would expect and what I have been saying day in and day out ... profits are not large because of high profit margins. but because of high volume. Clearly Elaine (and possible Matt Lauer) does not have a basic understanding of profit margins. But Tillerson really puts things into perspective. He says. "[W]hen you take our profit of $40 billion [in 2007]. that's 1 0 cents on every dollar of revenue that we generate... That puts us about in the middle of most Fortune 500 companies, so we're not at the top in terms of profit per revenue; we're not at the bottom." Do you hear that, folks? For all of you whining and complaining about oil companies, in terms of profit per revenue, these companies are about in the middle of most Fortune 500 companies.

Leave it to NBC to feature an email from some economic dolt who couldn't write a cohesive sentence on the difference between a profit and a profit margin.

Matt Lauer then had another brainless point. Apparently the oil companies are expected to be held to different standards than other Fortune 500 companies because "a lot of Fortune 500 companies. Mr. Tillerson, don't so directly impact people's ability to go to work, do their jobs, feed their families and that sort of thing, and that's where the problem comes in," So now the industry must not rely on supply and demand (like other companies would), but must also make businesses decisions based on how Billy is going to get to his job at MacDonald's.

What we're seeing in Lauer's comments is the new liberal dogma that it is only OK to make profits so long as you're making that profit on something that people don't really need.

One last thing. Lauer suggests that Exxon isn't investing enough of its profits in finding ways to bring down prices. Well Tillerson throws that right back in his face saying that they would do more if they could gain access to more areas to apply their technology. Are any of you environmentalists listening? When do you want to start becoming a part of the solution rather than the problem?

LINK

[LegalEagle 22]

In a similar situation, I have a question. When there is a natural disaster and people take chain saws, ice and generators and other needed "stuff" there to sell at real high prices, they are arrested for doing so. I don't know what law is being violated, and I don't have a clue what's wrong with doing that in America. Supply and demand, pure and simple. Can someone explain this?

Oil is very similar. They have no maximum price they can charge?

[otterinbham 0]

I think there's a huge difference between gouging people by capitalizing off their misery in an emergency. In those situations, martial law may be legitimately be established to ensure the safety of citizens.

In this situation, the natural costs of goods sold is high for reasons beyond the control of oil companies. Not exactly the same thing.

I can't decide whether this is pandering or simple ignorance of economics, but you would thought that the Democrats would have waited to start self-immolating until after the election.

[Justin5 20]

1. Do you understand the fundamental economic principal of supply and demand for commodities pricing in the oil market?

Yes.

2. Oil is a global commodity, bought and sold on the world market. Given that the nine largest private oil companies hold less than 5% of the entire world's proven oil reserves, isn't it more likely that the law of supply and demand is "manipulating" current prices than the five corporations represented at your witness table?

That plays a part. As does speculators assuming oil prices will raise, causing a chicken and egg problem. I have no problem with the current prices but they should use the profits to set up more refineries. Which leads us to......

3. As a U.S. Senator, you have control over oil production on U.S. federal government lands. Taxpayers own these lands and the energy that lies beneath them, but 97% of the federal OCS and 94% of onshore government lands are not being used. Are you willing to help increase the world's supply of oil - and thus reduce the price of oil and gasoline - by allowing more U.S. energy to be produced from these lands?

Wow. Nice facts. Here is one for you. Nearly three-fourths of the 40 million acres of public land currently leased for oil and gas development in the continental United States outside Alaska isn’t producing any oil or gas, even as the Bush administration pushes to open more environmentally sensitive public lands for oil and gas development.

In addition, everyone knows one day we WILL drill in Alaska. Of course we will. But wouldn't it make more sense to drill when cars get 80-90 mpg, instead of 20-30. Or better yet, when gas is $10/gallon, instead of $4/gallon. That oil in Alaska in an insurance policy for this nation. Lets not waste in now when our energy conservation leaves something to be desired.

4. The corporations represented at the hearing today produce roughly 2 million barrels of oil per day in America, for American consumers, with an American workforce. How many barrels of American oil, based on Energy Information Administration (EIA) estimates, have each of you voted to produce?

Again, these companies have land rights to drill in more places. They choose not to so they can roll in profits.

5. How often have each of you voted against supplying American consumers with 10.4 billion barrels of oil from ANWR, 85 billion barrels of oil from the Outer Continental Shelf (OCS), and 2 trillion barrels of oil shale in the West?

See the second paragraph in my answer to question 3.

6. For those of you who have voted to restrict American energy supplies, especially during periods of increased demand, how are your actions any different than those that you have frequently ascribed to OPEC?

If you can't answer this for yourself now, you haven't been paying attention. See answers for 2-4.

7. The sum of the American resources noted in question five is 2,095,400,000,000 (2.09 trillion) barrels of oil. The total proven oil reserves in the entire world is 1.3 trillion barrels. Which number is bigger?

I don't understand why holding on to our reserves now is a bad thing. Oil is still cheaper here that most places in the world (outside the Mideast). The longer we can wait to use our supply, the stronger our position becomes.

8. As the gap between supply and demand expands, oil prices increase, and oil company profits rise. What's the best way for oil company executives to send the entire U.S. Congress a "thank you" note for keeping energy supplies down and corporate profits up?

They have more places to drill now, they choose not to.

9. At today's prices, the United States is sending $1.5 billion dollars overseas - per day - to import oil from foreign countries. Do you think it would be a good idea to spend at least a fraction of that sum producing oil here in the United States?

Already been answered.

10. When was the last time you filled up your own gas tank?

I use public transportation.

Don't look for any of the socialist left dims answer any of the questions.

Sorry to not play along.

[Auburn85 432]

http://www.globalinsight.com/SDA/SDADetail9605.htm

well, apparently there is a new small refinery in the works?

First New U.S. Refinery in Thirty Years Announced by Hyperion Resources

14 Jun 07

The first new refinery in the United States in over thirty years has been announced.

Global Insight Perspective

Significance

Little-known and privately held, Hyperion Resources hopes to build an US$8-billion, 400,000-b/d refinery in the United States to handle incremental oil sands crude production expected from Canada in the coming years.

Implications

The proposal has been greeted with surprise, given that far larger companies have expressed a reluctance to go forward with refinery expansion or new build of their own. That an unknown would come forward to fill a spot left vacant by the country's established downstream players has made the announcement that much more remarkable.

Outlook

Project financing details were left out of this announcement so it is unclear how the company intends to raise the capital necessary; furthermore, it remains to be seen whether the company will manage to go the distance in terms of acquiring all the necessary approvals.

Hyperion Resources, a privately held oil and gas exploration and production company, has announced its intention to build the first new refinery in the United States since 1976. A firm location has not yet been decided on, though company officials have said they would be interested in building the facility at Elk Point in the U.S. state of South Dakota. Press reports had earlier pointed to the same location following details emerging of an unnamed buyer purchasing large tracts of the land in the area.

The facility would cost in the region of US$8 billion and would be able to refine 400,000 b/d of heavy sour quality crude coming from Canada's oil sands projects in the province of Alberta. Hyperion has estimated that the refinery would take up to 10,000 people some four years to build, and once completed would employ 1,800.

The Canadian Promise

Canadian's oil sands production is expected to double by 2015 to around 3 million b/d, and refineries south of the border have been scrambling to upgrade their facilities to be able to handle the heavier crude. The United States, however, has not seen a new refinery built in over thirty years, leaving demand for refined products to outstrip supply to such an extent that the country now has to import around 1.4 million b/d of gasoline (petrol). The country currently has a refining capacity of around 17.5 million b/d, although total demand stands at around 21 million b/d.

Furthermore, the lack of new refining capacity has encouraged existing systems to work that much harder, pushing refinery utilisation rates up as high as 95%. The increased wear and tear, however, has met with increased complexity to mean that outages, both planned and unplanned, have lasted that much longer, with negative implications for gasoline supplies. As a result, retail gasoline prices in the United States have consistently been above the psychologically important US$3/gallon mark for several weeks now. The downstream industry has, as a result, come under fire from various quarters over its reluctance to invest in new capacity expansion or build. For their part, they have continued to cite poor economics, not to mention onerous regulatory requirements, as main reasons for the lack of investment. Recent initiatives pushing for an increased take-up in the production and use of biofuels have further complicated the issue, leaving refiners to question the wisdom of building traditional refineries at a time when demand for traditional products might soon give way to demand for alternatives such as biofuels.

Outlook and Implications

Hyperion has a long way to go yet before it can start building. As things stand, the company will spend a year searching for and deciding on a suitable location. It will take five years alone to get all the necessary regulatory and environmental permissions before construction can even begin, and that itself is expected to take four years. As such, the refinery is unlikely to be ready before 2016 at the earliest. It is also unclear at this point how Hyperion intends to raise the US$8 billion it says the facility will cost to build, so these details will also have to be worked out.

If the company does manage to get all the approvals it needs as well as the financing, the decision to go ahead with a refinery at this crucial point may prove to be a very smart one, taking advantage of Canada's increased oil sands output, which by then should have hit the 3-million-b/d mark. Furthermore, the facility will likely benefit from the Keystone pipeline that TransCanada is hoping to begin operating in 2009. The 2,969-km pipeline aims to transport 435,000 b/d of crude from Alberta (Canada) to Illinois (United States), and will pass close to Elk Point. Keystone expansion plans involve boosting capacity to as much as 590,000 b/d before 2011.

as we've seen, corn based ethanol seems to consume alot just to make very little fuel. doesn't seem to be cost efficient either.

we need a combo energy plan rather than just pursuing one idea or bickering about it while doing nothing to actually address energy prices.

so what are everyones thoughts about ethanol that is sugar kane based? does it seem more feasible and way more efficient consumption wise than corn based ethanol?

brazil took the idea and ran with it.

http://www.dallasnews.com/sharedcontent/dw...ol.39bab41.html

COSTA RICA, Brazil – The other side of ethanol, vilified as a cause of soaring food prices and hunger, can be seen in Brazil, where farmers are pushing down energy costs – both at the pump and the electricity meter.

Twenty thousand acres of sugar cane are sprouting through the red soil around this small town, destined for fuel tanks across the world. It's the start of a $2.7 billion ethanol project put together by Brazil Renewable Energy Co., or Brenco, a private venture financed by U.S. and Brazilian investors.

They plan to export a billion gallons of ethanol a year by 2015 – enough fuel to offset demand for 65,000 barrels a day of oil.

About 350 miles to the east, in fields surrounding the town of Flores de Goiás, a firm from Irving, TruEnergy Renewable Fuels, is putting together a $523 million ethanol project that could offset 8,700 barrels a day of oil demand.

With world oil consumption running at 86 million barrels a day, the ethanol produced by these two private companies will amount to a modest alternative contribution.

Global ethanol production, however, is already greater than the yearly increase in world oil demand. Without ethanol, high oil prices would be higher still.

"Demand for oil is increasing every year, but reserves are more and more difficult to find," said Brenco founder Henri Philippe Reichstul, a former head of Brazil's Petrobras oil company.

"We have an alternative that is also the fastest way of reducing your emissions from cars without changing anything," he said. "To me, it looks like a no-brainer."

Still, others say ethanol advocates are driving drunk. Biofuels – especially corn-based ethanol made in the United States – are under attack for inflating food prices, destroying rain forests, depleting water supplies and increasing pollution.

"We felt there was good reason to investigate this avenue for generating a sustainable fuel away from oil," said Ken Cook, president of the farm-oriented Environmental Working Group in Washington. But "we are replacing oil insecurity with food insecurity."

Gov. Rick Perry and Sen. Kay Bailey Hutchison, R-Texas, have urged the Bush administration to ease up on ethanol mandates for gasoline because of rising food costs.

Seventeen countries now require refiners to add ethanol to gasoline. Last year, Congress ordered the use of enough biofuels to equal 20 percent of U.S. transportation needs – 35 billion gallons – by 2022.

One-fourth of the U.S. corn crop now goes to ethanol, and corn prices are so high that ethanol producers are struggling to make money as rising feedstock costs eat into profits.

"The corn price spike has scared a lot of investors," said Paul Ho of Credit Suisse's Renewable Energy Group.

Investors in Brazil are turning to sugar cane. Brenco and TruEnergy are planting in Brazilian cattle pastures and say they aren't crowding out grain producers.

brazil population is roughly 192 million