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Six House Dems Would Confiscate ‘Excessive’ Oil Profits

By: Steve Maley (Diary)  |  January 22nd, 2012 at 08:35 AM  | 

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Six House Democrats, led by Rep. Dennis Kucinich (D’OH), have filed a bill aimed at controlling gasoline prices. Styled the “Gas Price Spike Act”, H.R. 3784 would establish a “Reasonable Profits Board” which would have the power to confiscate 100% of oil company profits above a level that they deem to be “reasonable”.

I know: “You had me at ‘Kucinich’.”

Kucinich is either a naive buffoon, a craven panderer to his electorate, or a throwback to Soviet-style central planning. (Not that those descriptions are mutually exclusive.) That he could find five other elected nitwits (Reps. Woolsey[1], Langevin, Conyers, Fudge and Filner[2]) to put their names on such an unconstitutional socialist fantasy is an indication that the Progressive Wing of the Democratic Party has “progressed” right off the reservation.

According to a Thursday post at TheHill.com:

The Gas Price Spike Act, H.R. 3784, would apply a windfall tax on the sale of oil and [natural] gas that ranges from 50 percent to 100 percent on all surplus earnings exceeding “a reasonable profit.” It would set up a Reasonable Profits Board made up of three presidential nominees that will serve three-year terms. Unlike other bills setting up advisory boards, the Reasonable Profits Board would not be made up of any nominees from Congress.

The bill would also seem to exclude industry representatives from the board, as it says members “shall have no financial interests in any of the businesses for which reasonable profits are determined by the Board.”

Oil companies would only be able to make less than a reasonable profit without penalty. Anything over 105% of reasonable would be taxed at 100%. Proceeds of the confiscation would be dedicated to tax credits for high-milage vehicle purchase and mass transit subsidies for the poor.

Peeling back the layers of stupidity in H.R. 3784 would be akin to peeling an artichoke. In the interest of time, I will cut to my central point.

Implicit in the very suggestion that a Windfall Profit Tax is called for is the notion that somehow the oil companies are able to manipulate the price of oil, and hence, gasoline.

Gasoline prices are at historically high prices. Despite the spike above $4.00 per gallon in 2008, you actually paid 10% more at the pump in 2011.

When we refer to the industry as “oil and gas”, we mean “oil and natural gas”, not oil and gasoline. All oil companies make a substantial fraction of their revenue — many more than half — from natural gas.

The price of natural gas has plunged to 10 year lows recently as a result of warm winter temperatures, slack industrial demand and burgeoning supplies.

Natural gas prices have fallen to levels that make it difficult to justify drilling for more. Many of the new supplies of gas that come on will be incidental to the successful search for oil.

I challenge anyone who believes that oil companies control the price of oil and gasoline to explain how they do it, and why they seemingly have no control of natural gas.

[1] Rep. Lynn Woolsey (D-CA), chair of the House Progressive Caucus from Marin Co., CA.

[2] Rep. Bob Filner (D-CA). From his Wikipedia entry:

Filner has been a vocal supporter of the People’s Mujahedin of Iran, a group designated as a terrorist organization by the United States. Filner has long argued that the group’s designation should be removed, and considers the MEK an ally against the Iranian regime. He has accepted free trips, and paid speaking engagements from the group for which he has been criticized by the National Iranian American Council.

The other co-sponsors are John Conyers (D-MI), Rep. Marcia Fudge (D-OH) and Rep. Jim Langevin (D-RI).

Cross-posted at SteveMaley.com.


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  • michaelbowler

    it’s just not the companies you think of. The largest oil companies in the world are those state owned entities of OPEC nations. These companies, at the behest of the governments that control them , that meter the production of a great deal of the world’s oil supply and by extension control prices. Cartel control of production artificially increases demand by limiting supply, thereby increasing prices.

    Exxon, Shell, Conoco-Phillips, etc have little control over prices, if any. The profits they make are a relatively low percentage of their dollar input, it is the the money they spend that is staggering…to receive significantly lower returns would suppress their exploration efforts. You can bet, such activities as Kucinich suggests would force prices up ridiculously, making $4.00 gas look tantalizingly cheap.

    After Maxine Waters threatened oil companies with socializing their industries, we should take this threat seriously. Make no mistake, if they see a real chance to do it, they will. For now this Fascist approach will suit them,, but the true socialist approach is just around the corner

  • johnt

    then they came for my wood burning stove, etc.
    Misery not only loves company, it loves more misery. It’s not going anywhere but it’s a good prop for that portion of the population, no longer minimal, that harbors unexamined urges to suicide and agony. Such imperious drives of course are meant to be shared, it’s no fun keeping them to ones self, the rug chewers over at the Times, blogs & their sub-maniac adherents & the refuse discharged from asylums will hail this. There’s just something about self abnegation and slow death.

  • bk

    Disney World costs about $500 for a one-day visit for a family of four if they want to visit more than one park. That’s just for the ticket, not housing, parking, food, drink, souvenirs, etc. It’s just the kind of place no normal person can afford, unless they give up several years of other vacations.

    Also this week, it was announced that Disney CEO and Democrat mega-donor Robert Iger got a 12% raise last year to a cool $31.4 million.

    Yeah those oil companies are a bunch of greedy bas….

  • jaykali

    Liberals love price controls, it’s their only tool of choice for ‘saving money’. We’ve got price controls all over healthcare. Unintended consequences? Nah. Oh also do they refund the oil companies when they spend a lot of money exploring for new oil somewhere and lose money on the deal?

    • http://stevemaley.com Steve Maley

      Under the Kucinich Plan, oil companies would be free to risk and lose all the money they want, without government interference. Making less than a reasonable profit would be OK, too. It’s when you try to reap the reward for being smarter, more efficient or just luckier than the competition that the K-man comes calling.

      Oil companies, by the way, enjoy middling profits among all industries. Apple Computer, for one, enjoys profits that rival the oil majors on a fraction of the revenue, but no one complains about that because Apple has a smily, benign image. We take the value of a gallon of gasoline for granted but are willing to pay through the nose to play the latest version of Angry Birds on an iphone 4s.

      • duncer

        Excess profits is a good example of an oxymoron.

  • jaykali

    Bush had $3 gas for like one summer and got killed. Obama’s had high gas prices his ENTIRE presidency and the media just ignores it.

    • trevorb

      going to get higher than that. It’s 3.60 where I live and this is winter. Just think of how expensive it’s going to get in the summer.

    • aalsup

      This is part of the plan to push green energy. They are masters at manipulating the message.

  • btpull

    The oil co’s make their profits on crude oil not on retail sales of gasoline. OPEC and the market set the price of crude not Exxon, Chevron, etc. To offset crude oil profits the oil co’s would have to sell gasoline at a loss, which is clearly a violation of anti-trust laws.

  • macbookben

    …that advocating this indefensible legislation makes one appear to be any or all three of these types of characters. Fine. Bring the bill to the floor, Dennis, and let’s hear those who argue in favor of it. I seriously doubt this will accomplish anything beyond bolstering the already stark contrast between liberalism and conservatism. So I hope you proceed with your bold plans. It’s going to be reality TV, watching all those debates on C-SPAN. Guess I will have to turn the cable back on.

  • http://impudent.edublogs.org/ kyle8

    celebrity profits. All those left wing Hollywood stars and recording artists need to be capped. They need to give back to society those unhealthy profits!

  • Common_Cents

    This is war on capitalism, war on America.

  • Jeff Cooper

    Progressives did a very similar thing in the late 1800s and early 1900s to the rail industry through over taxation and regulations. This new attack on the oil and gas industry is an insidious attempt by Marxists in our federal government to confiscate private wealth. If you will recall, Senator Maxine Waters foretold this very thing in a 2008 hearing of the oil industry. Video here: http://youtu.be/QYj0Zcw75s0

    Members of Congress who have any sense of reason and reality must reject this bill because it is a violation of a basic tenet of liberty: the right to property. Beware, because looking further down the road at the bigger picture, the president could use this bill as an attempt to move toward the center by stating he is against it.

    • http://stevemaley.com Steve Maley

      …there is an aspect of the common carrier business that is like a utility.

      Profitability in O&G is impossible to predict.

      • Kudzu

        When the market depends on what dictator or country is currently in a revolt. Further emphasis on why we need a strong majority in the House and Senate and somehow must snag the XL Pipeline back across our border

  • persiflage

    anyone surprised?

    Governments in general, and Democrats in particular, posess an insatiable and rapacious greed to control and devour all wealth.

    Their target in this latest case – Big Oil – only reveals their stupidity. O&G industry profits are quite modest in terms of ROI; the gross profit numbers look big only because of the large volume of product they sell. And the O&G industry already remits tens of billions in taxes to Federal, State and local governments.

    It will never be enough for these clowns until we are all their slaves.

    • FlyingTigress

      Here in Washington State, the soon-to-be “declines to run again” Governor Chris Gregoire, faced with a, still, $1B budget hole, has proposed to (again) increase state spending.

      Her latest proposal is to levy a $1.50/bbl ‘fee’ on the few refinery operations in the state. After all, it isn’t fair that Big Oyl (Olive’s bast_rd half-brother) gets to profit without WA getting its ‘cut’…

      … well, other than what the state gets from its gasoline taxes at the pump.

  • ohiohistorian

    Kucinich’s district is one of them that was eliminated to preserve the minority Democratic stronghold of Martha Fudge (who is being challenged in the Dem primary). He now has to run against Marcie Kaptur or move and run against Martha Fudge. Either way, Dennis is likely to not be a major force in politics. His leftist constituents have effectively been split up among others to represent them.

  • http://pocketchangeproductions.net/ anotherindyfilmguy

    If they successfully do this to the oil companies everyone else is on the table for them to put over a barrel at their whim.

  • hampa

    Did Atlas just shrug?

    • Red_in_SC

      See my book review at http://www.theusreport.com/the-us-report/2011/9/15/atlas-shrugged-a-visionary-work-describing-current-global-st.html

  • jeffperren

    “an indication that the Progressive Wing of the Democratic Party has ?progressed? beyond capitalism.”

    That happened over 100 years ago.

    • http://stevemaley.com Steve Maley

      I struggled with the wording of that sentence and changed the wording a few times. Since your comment I reverted to something closer to the original version.

  • drfredc

    Seems like a better idea would be to pass a bill that reduces Congressional and WH pay (including staff, as well as bureaucrats), by the percent of deficit spending each year. Ditto with any defined benefit pension payouts.

    It’s nothing the average home or small business wouldn’t do to get their budget under control.

  • tlhanger

    A bill to make stealing legal, sounds like Democrats.

  • billstanley

    They obviously hate oil and natural gas, and a free marketplace. www.newsandopinions.net

  • Juggernaut

    Whoever wins the gop nomination should run a pro energy ad mentioning this bill with Obama in the picture saying Welcome to Obama’s America.

    • funwithknives

      let it build up all possible sponsors and have at the debate. since it is beyond the pale to make this stuff up and Progressives seem to want to give all others their talking points. { like this incredibly tiny-brained ,third world scheme}
      I would encourage Dennis to proceed.
      Then, as in ObamaCare, {and it’s mandates, meandering rules and unstated laws, and wealth confiscation} let people see up front and personal that anyone , or most any ‘non-approved’ vocation could be next on the list.
      Rember the Axiom: “….first they came for the Jews, then the Gypsies, then the Catholics….” Well then, let us hammer They (voters in General) CAN BE Next.
      How many of these folks are Card-carrying members of Socialist International/Dem. Soc. Amer. ??? I know for a fact Conyers is.

  • Next93

    Implicit in the very suggestion that a Windfall Profit Tax is called for is the notion that somehow the oil companies are able to manipulate the price of oil, and hence, gasoline.

    Implicit in the very phrase “windfall profits” is the idea that the oil companies are collecting a “windfall”. A windfall is defined as an unexpected and unearned benefit.

    I’m no fan of $4.00 per gallon gas, but the oil companies deliver a complex product that is the lifeblood of our economy in an incredibly efficient manner, despite byzantine array of laws, regulations, and bureaucracy.

    They have a century of investment in research, development, exploration, transport, processing, and delivery systems. They own leases, drilling rigs, ships, pipelines, and refineries. And that?s all before we get to a retail network that makes Starbucks look like a mom-and-pop shop.

    Exactly what part of all this falls under the heading of ?unearned benefit??

    • http://stevemaley.com Steve Maley

      “Windfall Profits Tax” is the language in the bill, not language that I made up.

      You are exactly right. There is a difference between a true “windfall profit” and “my gas is too d*** high”.

      The current price of gasoline reflects the high cost of crude oil and its substantial replacement cost.

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