Sen. Arlen Specter is not alone in his ignorance of economics when it comes to a term called profit margin. He and other Democrats who are leading the charge for taxing 'windfall profits' haven't a clue what they are talking about. Until and unless an investigation can show that a company, any company, not just an oil company, have adjusted prices so as to increase the profit margin from say 8% to some point significantly and artificially higher, then there is no gouging and no windfall profits. But never let it be said that Specter, like most Democrats, never met a tax on capitalism that he didn't like.
Fact is, the more product you sell, the more dollars you will gross. And, as long as costs remain the same, the profit margin will remain the same as well. The oil industry's profit margins are around 8%, and they always have been. 8% of of a million dollars and 8% of a billion dollars, and 8% of 100 billion dollars is still 8 percent. They are not 'making' any more, they are collecting more dollars, but not more of their share that their normal business can provide.
The oil industry is unique in that, no matter what happens, people need what they sell. Oil is not an optional commodity, same as food is not an optional commodity. Because our oil supplies have been inadequate for decades, and demand has only increased, the oil companies will continue to sell every bit of product that they can produce. And if you always sell out, you will always have record dollars. Not necessarily record profit margins. People like Arlen Specter should be ashamed of the way they demagogue the effects of decades of not producing our own oil supplies to the point that today over half of the oil we consume is imported, for their own political advantage.
The oil companies have been investigated over and over again by feelgood politicians like Specter and Schumer for price gouging. And guess what, they have never found evidence of institutional price gouging. Like most other economic issues in this country, the government (public) school system has dumbed down a major part of the population to the point that they haven't a clue of the difference between profits and profit margins and how supply and demand affect prices.
The problem is not that we are addicted to oil any more than we are addicted to air and food. What is true is these politicians are addicted to votes and will do whatever it takes to get them.
Sen. Specter: Tax Oil Co. Windfall Profits [NewsMax.com]
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