Saturday, April 30, 2011

Why oil company profits are good news

$11 billion in profits at Exxon! Grab your torches and pitchforks, arrest them evil executives and string 'em up! A private, for-profit company making a profit? Why that is criminal, that is immoral, that is downright un-American!

So Exxon reported a huge profit last quarter. Great! Guess who owns Exxon? In large part, most of us do! Exxon stock is 44% held by institutional investors, i.e. mutual funds and pensions primarily. Guess who owns those? You probably do in your 401k and your pension plan. Over the last year, the Vanguard 500 Index fund, a commonly held fund in many, many 401k plans, is up 15.49%. Those results show up in your retirement plan statements, the same ones you were crabbing about a few years ago. Guess what the number one holding in the Vanguard 500 Index fund is?

Exxon Mobil

Oh. So that nice increase you have seen over the last year in your retirement plan comes from companies like Exxon making profits. We have recovered from the huge downturn quite nicely, a downturn caused in large part by government tinkering with the mortgage market.

So what I am telling you is that in spite of the overheated rhetoric that is inflamed by President Obama and his lackeys in the media, many regular Americans like me and probably like you benefit greatly when private sector companies make profits.

Now should the Federal government be giving oil companies special tax breaks? No, I think any sort of special tax breaks like that are bad policy. Not so we can raise more tax revenue but because the government has no business tinkering in the private sector like that. I think we should eliminate those special breaks and lower Federal corporate taxes because more profits=more jobs and higher stock prices. Will some rich people get richer? Yes and they should. Will more Americans be employed and enjoy comfortable retirements because their retirement portfolios are doing well? Absolutely.

Here is another dirty little secret. Raising taxes on oil companies, which makes them less profitable, is not going to lower your price at the pump. Not one nickle. It is nothing more than class warfare rhetoric. Obama can't be bothered to lower spending one red cent but never misses an opportunity to call for higher taxes. Drilling for oil here and making use of our rich natural resources? Now that would lower gas prices but our President is too concerned with his own reelection campaign and trying to score political points to worry about how the policies of his administration are hurting Americans at the pump. Well, that an his half-baked adventure in Libya which has managed to turn that whole thing into a stalemate and that is having a direct impact on oil prices because of the ongoing instability in the Middle East.

A privately held company making a large profit that benefits its shareholders is not criminal or immoral, it is good business. A Federal government that is running up trillion dollar deficits annually and that stands in the way of the private sector drilling for oil that would lower gas prices? Now that is immoral.
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