We keep reading about the obscene profits of the oil companies. We consider profits, above all, an incentive to produce and provide - and in a competitive free enterprise system - the consumer should be protected against gouging by a powerful device
¾ the healthy greed of the producers, which causes them to undercut each other's prices. As far as we can see, the only gouging is now being done by Uncle Sam, who fixes oil prices (thereby causing shortages) and then takes a 50% cut of the profits.When do oil profits become obscene? We are not experts in pornography and can't answer. But, we suspect, neither can the professional pornographers (isn't that what you call people who write about obscenities?). The "obscene" profits of early 1974 were, in part, based on inflated inventories (oil bought before the Arabs quadrupled the price), and the pornographers never talked about return on capital, always about percentage increases in profits - over the lean years. Both foundations of obscenity have now disappeared: The inventories were bought at Arab extortionist prices, and the profits have no longer been lean. The result is natural enough: Oil profits declined from the 2nd to the 3rd quarter of 1974 - Exxon's by 6%, Texaco's by 18%, Mobil's by 24%. And at the best of times, return on capital was about 14% - below average in the manufacturing industries. But there are no congressional hearings, no network specials, no inflammatory speeches on these points. The pornographers are silent.
Instead, they now advocate a gasoline tax. Such a tax will curb demand alright. But it won't produce a solitary drop of oil.
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Vol. 2, No. 5
Newsletter: Access to Energy Newsletter Archive Volume: Volume 2 Issue/No.: Vol. 2, No. 5 Date: January 01, 1975 04:14 PM Title: The Changing Mood
Copyright © 2004 - Access to Energy Newsletter Archive
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