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Taxes on oil companies
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MacosNerd
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Jun 10, 2008, 11:10 AM
 
Its no secret that the oil companies get a lot of tax breaks. With gas pushing over the 4 dollar mark and the companies are raking in huge profits the tax issue has become a political hot topic.

I think its unfair that they get tax breaks especially in light of the profits they're making. With that said, I believe if the government does take away the gas prices the oil companies will pay the taxes as they should but then pass on that higher expense to us. I think its foolish to believe that they'll not want to protect their profits there by passing on any higher cost of business to the consumer.

Anyone Agree/disagree?
     
Andy8
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Jun 10, 2008, 11:20 AM
 
People tend to forget, that most governments have a fuel tax, which is usually the majority of the price of fuel. So while the oil companies are making huge profits now, governments are raking in even more.

The question really should be, what are the governments doing with all this extra cash?
     
MacosNerd  (op)
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Jun 10, 2008, 11:24 AM
 
Yes there's a gas tax both at the federal level and at the state level for us here in the US and that money goes to the maintenance and upkeep of the roads. Does it, in part I'm sure.

The questions isn't that but rather the credits that the US government provides the oil companies. Like the gas tax that is factored into the price at the pump. I'm speculating that if the US government recinds the credits, that extra cost will show up at the pump as well. While the government is looking at the billions of dollars in profit, the brunt of that will be borne by the drivers and not the oil companies - at least I think so.
     
Atheist
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Jun 10, 2008, 11:33 AM
 
Originally Posted by Andy8 View Post
People tend to forget, that most governments have a fuel tax, which is usually the majority of the price of fuel. So while the oil companies are making huge profits now, governments are raking in even more.

The question really should be, what are the governments doing with all this extra cash?
If I'm not mistaken, the U.S. Federal gas tax is 12%. Significantly less than many countries.

Edit: It's not a percentage. It's 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel.
     
Chongo
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Jun 10, 2008, 11:36 AM
 
one way to make gas cheaper is to sell, gas, not that reformulated gas that is worse for the environment. They have to make a different blend for each MSA, adding cost to the of production..
45/47
     
Andy8
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Jun 10, 2008, 11:38 AM
 
It is around 75% here!
     
peeb
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Jun 10, 2008, 11:55 AM
 
Originally Posted by Andy8 View Post
The question really should be, what are the governments doing with all this extra cash?
People tend to forget that governments provide socialized road systems for gas powered cars and trucks to run on. They build them, maintain them, police them and often provide emergency services for them.
     
mduell
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Jun 10, 2008, 02:59 PM
 
The oil companies are only making huge profits because they're large companies; as such, they also have very large expenses (nearly a hundred billion dollars a quarter), resulting in relatively modest profit margins.

Apple and McDonalds have better profit margins than Exxon-Mobile; should we be adding windfall profits for them too?
     
hokie17
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Jun 10, 2008, 03:08 PM
 
I think the Republicans (of which I am one, in the interests of full disclosure) were absolutely RIGHT to block this nonsense in Congress. If the oil companies have windfall profits taxed, guess where they're going to pass the cost off to?

That's right, you and me, at the pump.

The real answer is to expand the available supply by drilling more and building more refineries.

Congress, Get Off Your Gas, and Drill --Chuck Norris

There's also a petition here: American Solutions for Winning the Future
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smacintush
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Jun 10, 2008, 03:11 PM
 
I think that they would pass it on, but my question is how much would it actually translate to at the pump. I'm guess that it would be very little.
Being in debt and celebrating a lower deficit is like being on a diet and celebrating the fact you gained two pounds this week instead of five.
     
peeb
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Jun 10, 2008, 03:14 PM
 
Originally Posted by hokie17 View Post
The real answer is to expand the available supply by drilling more and building more refineries.[/url]
Nonsense. The real answer is to move to a non-carbon economy.
     
smacintush
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Jun 10, 2008, 03:14 PM
 
Originally Posted by hokie17 View Post
The real answer is to expand the available supply by drilling more and building more refineries.
I agree that they need to stop with the "not in my back yard" attitude about oil drilling and refineries.
Being in debt and celebrating a lower deficit is like being on a diet and celebrating the fact you gained two pounds this week instead of five.
     
smacintush
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Jun 10, 2008, 03:16 PM
 
Originally Posted by peeb View Post
Nonsense. The real answer is to move to a non-carbon economy.
I agree that we need to move on to more intelligent ways of powering our society.
Being in debt and celebrating a lower deficit is like being on a diet and celebrating the fact you gained two pounds this week instead of five.
     
Shaddim
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Jun 10, 2008, 03:32 PM
 
Nucular! (sic)

Seriously, we need 40-50 new nuclear plants in the US.
"Those who expect to reap the blessings of freedom must, like men, undergo the fatigue of supporting it."
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peeb
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Jun 10, 2008, 03:33 PM
 
Originally Posted by Shaddim View Post
Nucular! (sic)
Seriously (sic), we need 40-50 new nuclear plants in the US.
Maybe a hole in the head, too?
     
Dakar the Fourth
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Jun 10, 2008, 03:52 PM
 
Great post.
     
peeb
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Jun 10, 2008, 03:56 PM
 
Which one?
     
Shaddim
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Jun 10, 2008, 05:14 PM
 
Originally Posted by Dakar the Fourth View Post
Great post.
Thanks.
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MacosNerd  (op)
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Jun 10, 2008, 09:12 PM
 
Originally Posted by peeb View Post
Maybe a hole in the head, too?
You may laugh but nuclear is the only viable option for powering the country, other then fossil fuels.
wind and solar are no where near the ability that nuclear is. There's been a few articles about the reemergence of nuclear power and how it can break us free from oil dependancy.
     
art_director
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Jun 10, 2008, 09:35 PM
 
Big oil gets tax breaks and small biz gets fooked. Welcome to America.
     
peeb
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Jun 10, 2008, 10:08 PM
 
Originally Posted by MacosNerd View Post
You may laugh but nuclear is the only viable option for powering the country, other then fossil fuels.
wind and solar are no where near the ability that nuclear is. There's been a few articles about the reemergence of nuclear power and how it can break us free from oil dependancy.
You're quite, quite wrong. There is a new thread on this, nuclear is dead, aside from a few pork-loving politicians who want to continue to subsidize it at three times the rate of wind or solar.
     
spacefreak
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Jun 10, 2008, 10:55 PM
 
Originally Posted by peeb View Post
People tend to forget that governments provide socialized road systems for gas powered cars and trucks to run on. They build them, maintain them, police them and often provide emergency services for them.
Property taxes cover local roads, county roads, police, emergency services, etc. State roads, bridges, tunnels, state police, etc. here are funded by tolls and state income taxes. Federal income tax dollars go to federal roads, bridges, and tunnels.

This stuff isn't provided for the people... it's paid for by the people.

As for "windfall profits", "windfall" represents something that is unexpected and/or not worked for. Hence, by definition, no oil company profits are windfall, because that is precisely why they operate.
     
Chongo
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Jun 11, 2008, 08:03 AM
 
Originally Posted by mduell View Post
The oil companies are only making huge profits because they're large companies; as such, they also have very large expenses (nearly a hundred billion dollars a quarter), resulting in relatively modest profit margins.

Apple and McDonalds have better profit margins than Exxon-Mobile; should we be adding windfall profits for them too?
"Big Cereal" has higher profit margins than "Big Oil"
45/47
     
Dakar the Fourth
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Jun 11, 2008, 08:16 AM
 
Originally Posted by Shaddim View Post
Thanks.
...and peeb gets banned.
     
Chongo
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Jun 11, 2008, 08:42 AM
 
Originally Posted by MacosNerd View Post
You may laugh but nuclear is the only viable option for powering the country, other then fossil fuels.
wind and solar are no where near the ability that nuclear is. There's been a few articles about the reemergence of nuclear power and how it can break us free from oil dependancy.
This, I believe, is why McCain is "embracing" MMCC. He states in his speeches that we need more nu-clear plants and will use MMCC to get the ball rolling.
45/47
     
Andrew Stephens
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Jun 11, 2008, 03:24 PM
 
Originally Posted by hokie17 View Post
The real answer is to expand the available supply by drilling more and building more refineries.
The real real answer is to do something about the rampant speculation on oil prices. There is adequate supply in the market however prices are driven up by speculators buying in advance at agreed values to create artificial shortages and drive the price up to increase profits when they sell at the new higher price.

I listened to the BBC treating a russian oil/gas billionaire as if he was an impartial energy expert today. He was commenting that he expects fuel prices to be double by this time next year. As if he has no interest in this coming to pass the BBC journalist was happy to comment on this as an almost pre ordained fact instead of an attmept to push the market forward and increase profit.
     
Shaddim
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Jun 11, 2008, 05:05 PM
 
Originally Posted by Dakar the Fourth View Post
...and peeb gets banned.
I've not replied to peeb in over 5 months, he's been on ignore.
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tie
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Jun 12, 2008, 01:40 PM
 
Originally Posted by Andrew Stephens View Post
The real real answer is to do something about the rampant speculation on oil prices. There is adequate supply in the market however prices are driven up by speculators buying in advance at agreed values to create artificial shortages and drive the price up to increase profits when they sell at the new higher price.
Your mechanism for increasing prices, "buying in advance at agreed values to create artificial shortages," doesn't make any sense. How does buying in advance create shortages?

Here are two interesting blog articles on oil prices:
1. Effect of speculation
2. Commodity futures speculation
In the second article, the author points out that prices of commodities without futures markets have largely increased even faster than prices of commodities with futures markets. In the first article, he describes a mechanism where speculation does increase prices in a sort of bubble.

Generally, the fundamentals are bad. World oil production is not increasing, while world demand is greatly increasing. Therefore we get higher prices. Countries like Saudi Arabia are rationing their supplies because they see that countries like the US haven't bothered to make any investments in reducing their oil dependency over the last eight years. (They'd like the price as high as possible as long as it doesn't cause their customers to seek other solutions. Since the Bush administration supports oil companies over anybody else, Bush also wants the prices to be as high as possible and has never tried to do anything about it.) Finally, of course there is the weak dollar.

As a country, we can't do anything serious to address the supply issues. There isn't nearly enough oil. We haven't bothered to do anything to reduce demand, and we are now paying for it. Republicans may like to lower taxes but they screw up everything else so badly that I think the net effect is negative. (Depending on your income-- obviously richer people spend less on gas and get larger tax breaks from Republicans.)
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steve666
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Jun 13, 2008, 12:57 AM
 
Instead of a windfall profits tax the Feds should force the oil companies to set up E-85 and Hydrogen stations at every single gas station that carries their name.
The car companies need the infrastructure in place before they start selling fuel cell and E-85 in mass quantities.
In addition the Feds should force car companies to make every engine produced E-85 capable.
     
Andrew Stephens
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Jun 13, 2008, 04:24 AM
 
Originally Posted by tie View Post
Your mechanism for increasing prices, "buying in advance at agreed values to create artificial shortages," doesn't make any sense. How does buying in advance create shortages?
So why are US oil reserves at an all time high? Why is Iran storing excess production in ships?

Here's how it works

Oil is a commodity, like wheat, corn or pork bellies. The commodities markets trade in what is called a futures contract. Which is a contract set at a predetermined price for delivery in the future.

The way the futures markets are supposed to work, is that both the producers ( sellers of futures contracts) and end users ( physical buyers of the commodity), have a market place to negotiate market prices in the future, to take some of the risk out of fluctuating daily market prices.
For example , if you manufactured tomato soup, you may have a contract with your distributors to produce and deliver the soup at a pre-agreed upon price. The only way to make good on this contract is to make sure you have the availability of tomatoes, at a profitable price to you, delivered when you need them. This is the function of the futures market.

However, there is one more player in the game, the speculator. The speculators role is to keep the market liquid by betting on the price going either up or down of any given commodity on any given day or future day.
Speculators can make huge gains or losses in the futures market because the futures contracts are leveraged. Speculators control the value of the contract purchased with only a fraction of the money out of pocket.

Now that you have the basics, heres how the price get manipulated:
It called cornering the market. Cornering the market has a long and checkered history. There are many techniques a group of speculators can use use if they buy up a majority of the open interest in the outstanding contracts in one commodity. By simply owning most of the contracts, the speculators refuse to sell until they can receive a much higher price.
http://en.wikipedia.org/w...

In actuality, it is worse then just stockpiling oil contracts. As the credit crisis unfolded last summer, the "smart money" ( Large investment banks, hedge funds, commercial banks and the rest of the Hitler youth, sic)
realized the the "dollar carry trade" was over. And that the dollar was headed lower fast . The solution, short the dollar and buy oil futures long.
This stampede of money into the futures market has cause oil prices to rise unjustifiably, as well as falsely holding down the dollar. Since oil is dollar denominated it was like hitting two birds with one stone. A great way to make a lot of money fast, well if you are sitting on several 100 million dollars of OPM, that you can speculate with.

http://www.marketwatch.co...
     
spacefreak
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Jun 13, 2008, 04:25 AM
 
Originally Posted by steve666 View Post
Instead of a windfall profits tax the Feds should force the oil companies to set up E-85 and Hydrogen stations at every single gas station that carries their name.
The car companies need the infrastructure in place before they start selling fuel cell and E-85 in mass quantities.
In addition the Feds should force car companies to make every engine produced E-85 capable.
Like I stated earlier, there are no "windfall" oil profits, because the oil companies work for their profits. A "windfall" is a profit that is unexpected.

As for your idea, it's got disaster written all over it. I'd much rather see something like Toyota and Exxon partnering to offer a major promotion (like iPhone/ATT). You can't force these types of solutions, however, at least not unless the government is willing to pay for the whole shebang while providing insurance against fiscal losses for every player involved.

The best solutions always come from the private sector. I don't think any product or service that's considered revolutionary on a grand scale, and with widespread appeal, has ever come from the government. Can you name any?

When the market is ripe, and when the technology is economically feasible, and when the likelihood for profit is present, that's when we'll see some movement.
     
Andrew Stephens
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Jun 13, 2008, 04:27 AM
 
On the other side of the coin. It is true that the only real way to stop the price of oil from having such a dramatic and damaging efect on our lives is to use (much) less of it.
     
ebuddy
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Jun 13, 2008, 07:13 AM
 
Originally Posted by smacintush View Post
I agree that they need to stop with the "not in my back yard" attitude about oil drilling and refineries.
I agree. Particularly when other countries are drilling in your side yard.

If the problem is speculators, sell a portion of the strategic reserve back to the market. Take that money, invest in domestic drilling, and slowly replenish the strategic reserve. A move that shows we're serious about addressing supply, and energy independence would be in order.

Some of the ideas I hear are hard to fathom personally. Why would an oil company invest in its own demise? These are oil companies. They can and do invest a little in alternative sources of energy, but I don't understand why it's their "responsibility" to. Also, why would you take a commodity like oil, allow oil companies to assume all the risk related to that commodity, then sit back and collect a "just because" tax? Even more confounding, why would an oil company not turn back around to charge more?
ebuddy
     
Andrew Stephens
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Jun 13, 2008, 09:32 AM
 
Originally Posted by spacefreak View Post
I don't think any product or service that's considered revolutionary on a grand scale, and with widespread appeal, has ever come from the government. Can you name any?
The UK national health service

State pension schemes

State provided education

I think that this idea that the private sector is always more efficient and effective than the public sector will pass. Like any ideaology the truth will end up that some things are better when provided by private companies and some are better when state run.

Anything that is designed to offer inclusive, non partisan and socially supportive services will probably always be better run by the state.
     
smacintush
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Jun 13, 2008, 11:00 AM
 
Originally Posted by ebuddy View Post
I agree. Particularly when other countries are drilling in your side yard.

If the problem is speculators, sell a portion of the strategic reserve back to the market. Take that money, invest in domestic drilling, and slowly replenish the strategic reserve. A move that shows we're serious about addressing supply, and energy independence would be in order.

Some of the ideas I hear are hard to fathom personally. Why would an oil company invest in its own demise? These are oil companies. They can and do invest a little in alternative sources of energy, but I don't understand why it's their "responsibility" to. Also, why would you take a commodity like oil, allow oil companies to assume all the risk related to that commodity, then sit back and collect a "just because" tax? Even more confounding, why would an oil company not turn back around to charge more?
If they were to just announce that we were going to start drilling off the outer continental shelf the oil price would drop almost immediately,
Being in debt and celebrating a lower deficit is like being on a diet and celebrating the fact you gained two pounds this week instead of five.
     
dcmacdaddy
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Jun 13, 2008, 11:43 AM
 
Originally Posted by Andrew Stephens View Post
The UK national health service

State pension schemes

State provided education

I think that this idea that the private sector is always more efficient and effective than the public sector will pass. Like any ideaology the truth will end up that some things are better when provided by private companies and some are better when state run.

Anything that is designed to offer inclusive, non partisan and socially supportive services will probably always be better run by the state.
That's probably true as the state has the only incentive to provide for everyone. But, then again, who elects the representatives of the state to rule them on their behalf? In other words, do these actions by the state come as a result of citizens wanting these policies and electing representatives who will support these ideas or do citizens just elect any old person to be their legislative representative and it is the representatives that come up with these ideas and implement them?

<OT>
But I think most Americans don't want health-care and pensions provided by the state (at least not in a serious, all-encompassing and all-inclusive way) if the outcome of such an endeavor would be a leveling of the financial disparities between them and their neighbors. I think most Americans don't want their neighbor to be as well-off as them--and state-run health-car and retirement plans function as a major financial leveler across social and cultural groups. I think the psychology behind the opposition to these concepts is based on a dis-proportionate sense of self-worth on the part of most Americans. I think most Americans have this silent air of superiority about them and don't want to see their neighbors/peers/colleagues do as well as them in life. If this attitude had to be summed up with a pithy catch-phrase, I would say that phrase is "If I could do it, they should have been able to do it as well" in regards to providing for ones personal health and financial well-being. I think most Americans would be willing to let a neighbor have a more difficult time in their life if it meant they could feel better about themselves because of their neighbor's misfortune.

(It's quite possible this attitude/trait is as prominent in other countries and/or cultural groups but not having lived overseas for extended periods of time I can't offer an opinion on how this idea might function in other countries and/or cultural groups.)


And yes, before everyone jumps on my back for having a low opinion of my fellow citizens, let me just state for the record that I do, in fact, have a low opinion of most of my fellow citizens.
</OT>
( Last edited by dcmacdaddy; Jun 13, 2008 at 11:50 AM. Reason: clarifying my off-topic remarks.)
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spacefreak
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Jun 13, 2008, 11:11 PM
 
Originally Posted by Andrew Stephens View Post
Anything that is designed to offer inclusive, non partisan and socially supportive services will probably always be better run by the state.
I completely disagree, Andrew. Private entities are forced by nature to perform the best they can. Their leadership is not "tenured" for 6 years, 4 years, or even two years. If they screw up, they're done. The buck always stops with the top-dog. Not so with state-owned entities.

Most mainstream consumer goods and services are non-partisan. Does Apple only develop for and market to Democrats? Exxon? Volvo? Your local hospital?

Show me a government-run program that is exceeding (by overwhelming accounts) consumer expectations, and that is performing so well that it's fiscal performance and outlook is blowing analysts away.
     
spacefreak
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Jun 13, 2008, 11:16 PM
 
Originally Posted by steve666 View Post
Instead of a windfall profits tax the Feds should force the oil companies to set up E-85 and Hydrogen stations at every single gas station that carries their name.
It appears Exxon got wind of your idea, Steve. So please, try to keep your future intiative under wraps, because I still need my local gas stations, restaurants, and convenience stores...

Exxon to exit retail gas business: reports | Reuters

Exxon is getting out of retail gas business, according to the Dallas Morning News and Fox Business News...

The Dallas Morning News reported Exxon said it will sell the 2,220 service stations it still owns across the United States. There are 12,000 Exxon Mobil branded stations, the majority of which are already owned by families or companies outside of Exxon.
Do you still want the government to force the remaining branded stations - owned by families and small business - to build out their facilities and systems, while paying and absorbing the financial burden for such transformations?
     
Arkham_c
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Jun 16, 2008, 01:16 PM
 
Originally Posted by mduell View Post
The oil companies are only making huge profits because they're large companies; as such, they also have very large expenses (nearly a hundred billion dollars a quarter), resulting in relatively modest profit margins.

Apple and McDonalds have better profit margins than Exxon-Mobile; should we be adding windfall profits for them too?
This is the argument made by oil executives. The problem with this argument is that even if the profit margin remains at say, 5%, as the gross increases, the net does as well.

5% of $10 billion at $40/barrel is a lot less than 5% of $30 billion at $120 a barrel. It may be the same percentage of gross, but it's $20 billion extra dollars. I'm not arguing for or against taxing this windfall, but it is a real and true cash profit increase for the stock owners of big oil.
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Chuckit
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Jun 16, 2008, 01:59 PM
 
Originally Posted by spacefreak View Post
The best solutions always come from the private sector. I don't think any product or service that's considered revolutionary on a grand scale, and with widespread appeal, has ever come from the government. Can you name any?
The Internet?
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Jun 16, 2008, 03:50 PM
 
Originally Posted by Chuckit View Post
The Internet?
Velcro?


Or any of the other scientific advances provided to us by NASA-funded research.
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I would prefer my humanity sullied with the tarnish of science rather than the gloss of religion.
     
   
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