The Lamentations of Lowry – Chapter 7: On the Role of Business

May 30, 2008 at 3:34 pm 11 comments

I am infuriated by the show put on last week on Capitol Hill with regard to “Big Oil.” As has become the practice in the last several years, oil executives were summoned to Congress to answer for the crime of making money.

Last Friday’s NYT had an informative piece about the sideshow, and I find the politicians utterly unconvincing in both their criticisms of the oil firms and their attempts to seem one with the common man. Most offensive was this statement (if it can be called such) by ultra-left liberal Maxine Waters of (surprise, surprise) California:

Milton Friedman famously wrote:

There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

The CEO of ExxonMobil would agree. He said that his company’s “corporate social responsibility” is to produce more energy. When I heard Water’s outrageous comment about nationalizing oil companies, I was incredulous. Then I heard talk from Obama of a $15 billion oil profit tax:

The plan would target profit from the biggest oil companies by taxing each barrel of oil costing more than $80, according to a fact sheet on the proposal. The tax would help pay for a $1,000 tax cut for working families, an expansion of the earned- income tax credit and assistance for people who can’t afford their energy bills.

The profits right now are so remarkable that one could trim them 10 percent or so, which would turn out to be somewhere in the $15 billion range,” said Jason Grumet, an adviser to the Obama campaign.

Just a little trim, said the mohel. Hillary’s on board too:

Clinton said she plans to introduce legislation to create a strategic energy fund, largely paid for by an excess profits tax on big oil companies, who she noted earned a combined $113 billion in profits last year.

She estimated that the profits tax and a repeal of other tax breaks for the oil industry could pump $50 billion into the energy fund over two years and pay for an array of tax incentives and for $9 billion in new research initiatives for wind, solar and other alternative energy resources. Oil companies could escape the tax if they reinvested profits into similar programs.

 When I heard her pronounce that plan in a soundbite my lamentation spilled into rage. I yelled, “It’s not your damn money!” I should mention that I was alone in my car and I yelled very loud. That money belongs to the shareholders, groups like the Fraternal Order of Police and the National Black Police Association, and perhaps even you and I.

I care far less about the image of our foreign policy internationally than I do our economic policy. Talk like this undermines the most robust and dynamic economy in the world. There is tremendous trust in our economic system. To even hear someone mention nationalization of private industry in a public forum, even someone as daffy as Maxine Waters, puts fear in me. Did I wake up in the middle of Atlas Shrugged?

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11 Comments Add your own

  • 1. JL  |  May 30, 2008 at 10:11 pm

    Wow, hadn’t seen that statement by Maxine Waters about nationalizing the oil companies. That is frightening.

  • 2. lemare  |  May 31, 2008 at 3:44 am

    I almost felt a little sorry for her, because she started to speak out of indignancy, but it soon became clear, she had no idea what she was talking about.

  • 3. Curtis Plumb  |  May 31, 2008 at 7:03 am

    Maxine Waters was born indignant. One of the original affirmative action congressional experiments. Never met an issue she couldn’t muddle.

  • 4. Sportsattitude  |  May 31, 2008 at 10:48 am

    Wasn’t this circus also the one where one of the operating officers couldn’t answer the question what his salary was…?

  • 5. lemare  |  May 31, 2008 at 8:33 pm

    OK, kids. You all know that I used to work in Big Oil, and while I usually don’t broadcast this, I worked in fuel pricing.

    It is true that on the retail side of the business, they are becoming more increasingly strapped for margin, but as people take fewer big road trips, their volume will also suffer… So fuel retail is NOT getting rich over the high gas prices.

    The people who pump it out of the ground at $100+ a barrel are who are cleaning house. That’s why the oil companies have record profits, because they drill, they pump oil and it’s worth a freekin’ fortune. Oil companies have their “downstream” and “upstream” operations separated into different little companies, and so it’s a little convenient to quote the low margins at the pump and the terrible plight of the fuel retail business. But they are, by all means pumping oil and getting VERY rich off us. I am a BP share holder and it still kind of ticks me off. And I’m pro- Big Oil, and I’m pro-capitalism.

    Fuel is hard because everyone needs it. Even if you don’t have a car, you’re seeing it in the increasing prices of everything else (food is a BIG one right now). Supply and demand dictates that if we all use less (start walking/riding bikes/carpooling more), then the market will drive the per barrel price of oil down. But because that’s not going to be dramatic enough, people are spending less money on other things (like clothing, which hurts MY bonus).

    Ms. Watters needs to get her head out of her @$$ and realize that we have untapped resources here in the US. It’s not going to get better until we drill Alaska… And the caribou will be none the wiser.

    Anyhow, while I think Ms. Watters is a complete moron, I do not hold the oil companies blameless. They’re still gouging us, but on the upstream (drilling and exploration).

    But we are largely beholden to those shieks in Saudi Arabia and Dubai and until congress gives the go ahead to drill Alaska, prices won’t get any better and people will buy fewer women’s knits and all of our lives will be a lower standard of living. (Except the caribou, they will be just fine).

  • 6. Lowdogg  |  May 31, 2008 at 11:54 pm

    Fuel pricing and oil pricing are two separate areas, and oil companies can’t control the futures market, at least not completely, right?

    As to their compensaiton, I hope that the executive was referring to his total compensation, not necessarily his salary. At the same time, I meet with many well-compensated people that couldn’t tell you their salary.

    My post’s purpose was more about the danger to our economy should the government become more intrusive. Do we believe they would stop with one industry? Oil is the bad guy of the moment. Soon it may be the higher-end mall retailers!

    FIrst they came for the oild companies…

  • 7. lemare  |  June 1, 2008 at 3:10 am

    Yeah, nationalizing ANYTHING is ridiculous. I’d like to see half the government agencies privatized!

  • 8. Lowdogg  |  June 1, 2008 at 9:30 pm

    Just half? Are you a closet liberal or something?

  • 9. Jen  |  June 4, 2008 at 5:25 pm

    Thanks to you, Lowry, I’m currently reading Atlas Shrugged. As for energy, I’m a fan of going nuclear.

  • 10. Lowdogg  |  June 6, 2008 at 11:01 am

    This pleases me greatly.

  • 11. Tom  |  June 13, 2008 at 1:28 am

    John Galt is dead.


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