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Friday, June 20, 2008

Are Oil Profits Obscene?

I don't enjoy paying $4.00 a gallon for gas any more than the next guy. But I also don't enjoy hear a bunch of Marxists and pseudo-Marxists bellyache about the free market.

The market does a far better and far smarter job of controlling prices than the government has ever done with it's nationalization schemes and price controls. In fact, government interference has a lot to do with the current cost issues, since government has strangled the oil industry's ability to produce new product and refine that product for sale. We haven't built a new refinery in over 30 years, and our refining capacity is about maxed out.

We hear lots of complaining about "obscene oil profits," and the oil companies do make a hefty profit. But then, they sell a hefty amount of product. Common sense says if you sell a lot of something, you're going to make a lot of profit, all things being equal.

But are these profits as "obscene" and out of kilter as the liberals would have us believe?

Karl Rove has a piece at the Wall Street Journal today which provides some much-needed perspective on "Big Oil" profits.

While the oil industry makes about 8.3 cents per dollar profit...

- Electronics make 14.5 cents per dollar.
- Computer equipment makers take in 13.7 cents per dollar.
- Microsoft's margin is 27.5 cents per dollar of sales.

- Oil and gas companies made $86.5 billion in profits last year.
- The financial services industry took in $498.5 billion in profits.
- The retail industry walked away with $137.5 billion.
- Information technology companies made off with $103.4 billion.

Since these other industries are making even more obscene profits than the oil industry, maybe we should impose windfall profit taxes on the computer or retail industry...and watch the price of goods go up even more.

The knee-jerk reaction of liberals to blame private industry for all our problems is tired, myopic, Marxist and un-American.

The American thing to do would be to get the government out of the way, open up new areas like ANWR for oil production, and streamline the regulatory process for new refineries. Let capitalism do the work of prosperity that it's proven over and over that it can so admirably do.

HT to the National Center for Policy Analysis.


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