The Myth Of Big Oil And Windfall Profits

To all of you Utah liberals who love to prattle on about "big oils windfall profits" I ask one question. How much is a "windfall" profit? 20%? 30%? Or perhaps as low as 10%

If that's what constitutes windfall profits, most of corporate America would qualify. Take aerospace or machinery -- both 8.2% in 2007. Chemicals had an average margin of 12.7%. Computers: 13.7%. Electronics and appliances: 14.5%. Pharmaceuticals (18.4%) and beverages and tobacco (19.1%) round out the Census Bureau's industry rankings.

What do you suppose "big oils windfall profits" were in the same time period? 40%? 50%? No - much lower....

Maybe they have in mind profit margins as a percentage of sales. Yet by that standard Exxon's profits don't seem so large. Exxon's profit margin stood at 10% for 2007, which is hardly out of line with the oil and gas industry average of 8.3%, or the 8.9% for U.S. manufacturing (excluding the sputtering auto makers).

The next time you hear someone prattle on about "windfall profits" for "big oil", think about some of the facts presented here.

Earlier in the presidential campaign, when John McCain and Hillary Rodham Clinton called for a summer holiday on the 18.4-cent-per-gallon federal gasoline tax, Barack Obama dismissed the tax vacation as an election-year gimmick that offered financially squeezed families "just pennies." I wrote that, unlike Clinton and McCain, Obama "stood tall in opposing the gas-tax holiday."

Now we know why. Obama must have seen the gas-tax holiday as chump change in the wondrous store of campaign gimmicks. When Obama panders, he panders big-time. Witness his proposed "emergency energy rebate" that -- on the heels of this year's $600 per taxpayer stimulus package rebate sent to taxpayers this year -- promises additional $500 checks for American workers or $1,000 per family "as soon as this fall." (Is there an income cap for how Obama defines eligible "working families"? The campaign did not get back to me on that by my deadline.)...

In a clever effort to dress up his big-time pander as a high-minded position, Obama has suggested that McCain is "in the pocket of Big Oil." Obama points out that McCain wants to lower Exxon Mobil's tax bill -- which is true, because McCain wants to lower all the corporate tax rates to 25 percent to create jobs.

McCainiacs respond by noting that Obama voted for the 2005 omnibus energy bill -- signed by President Bush -- which gave oil companies specific tax breaks. For that very reason, McCain voted no.

The next time someone tells you that that the #dontgo movement is a gimmick remind them of who is offering up the BIGGER gimmick.

According to Stanford economist John Taylor, who is a McCain adviser, raising taxes on oil companies likely "will raise the price of gasoline."

If critics are right, and a windfall profits tax raises gas prices or leads to a drop in domestic oil output, which only worsens America's chronic dependence on foreign oil, then what? Another emergency energy rebate check?

I know most people would rather have a plan that offers an increase in supply in the next 10 years than a gimmick that will most likely raise our already high gasoline and home heating charges.