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Friday, April 28, 2006

Join Me In A "Can't Miss" Opportunity

Want to earn massive returns on your investment? Then join me in a new investment opportunity that I am heading. Friends, family and sharp investors are needed for my oil futures fund. We will become rich in no time.

Of course, we should ignore the guys at Cato, Peter Van Doren and Jerry Taylor, who wrote:

While the raw earnings figures sound big, in proportion to the size of those companies, they are unexceptional. Divide profits by sales, for instance, and you'll find that in the fourth quarter of 2005 (the last quarter for which we have data available), profit margins were 6.8 percent at British Petroleum, 7 percent at ConocoPhilips, 7.1 percent at Shell, 7.7 percent at Chevron and 10.7 percent at Exxon Mobil. The 20 largest investor-owned oil companies earned a collective 8.8 cents on every dollar of sales for that quarter.

Now, it's not a stretch to note that the lady who sells us hot dogs on the street probably earns a better profit margin than that. But more to the point, the nation's most prominent critic of "oil profiteering" — Fox News personality Bill O'Reilly — works for a company (News Corp.) that reported a 10.2 percent profit during the fourth quarter of 2005. If you're after really big earners, however, check out Yahoo (a 45.5 percent profit margin), Citigroup (33.4 percent), Intel (24 percent) or Apple (22.7 percent).

Returns on invested capital over a longer time frame are even more telling. Analysts at Goldman Sachs report that returns on investment capital in the oil and gas sector from 1970 to 2003 were less than the U.S. industrial average over that same period.

Fancy, shmancy talk by those eggheads. You know where the real money is being made. And as the head of this group, I will be expecting a $400 million retirement package as well.

Econ 101 and Gas

On the price of gasoline from Thomas Sowell:

Much is made of the fact that gasoline prices go up before the higher priced oil is turned into gasoline. What something cost is history, what it is worth now is economics.

Thursday, April 27, 2006

Tax Gouging Senators

Md. Senate candidate Michael Steele, the black GOP candidate I might add, is pandering on the gas price issue by releasing this statement:

Washington must take swift action to come to the aid of families across America. The quickest way it can do so is to immediately suspend for 120 days the 18.4 cents-per-gallon tax. We know that gasoline prices generally increase during the summer months, and that is why it isabsolutely critical that Congress and President Bush act now to immediately lower gasoline prices.

Keep up the pandering Mr. Steele. Keep it up.

Meanwhile Neal Cavuto (as replayed by Rush today-sorry for no link to the transcript) was relentless on Senator Dick Durbin, who pandered in the traditional way by highlighting the gross oil profits. Cavuto asked whether there was "tax gouging" going on by the government since oil companies have only recently been earning 9 cents per gallon profits while (see the post below) the state and federal taxes range from 26 cents in Montana and Wyoming to 60 cents in Hawaii for years and years.

Durbin continually changed the subject.

Oil: Demand Just Exceeds Supply

Do I like paying close to $3 per gallon of gasoline? No.

But my anger over the price is directed towards those who have artificially increased the price of this product.

As we all know, price is information about what the market deems the value of a commodity to be. The owner of the commodity will direct inventory to locations paying the highest price. He wants to maximize his profits. However, the seller cannot randomly choose a price. When the commodity is in surplus, the buyer has many options and will normally choose to purchase from the seller with the lowest prices. That is why Wal-mart does so well.

With gasoline, the world market through its pricing is telling us that the demand is great and the supply cannot keep up with it. The supply is down because of a number of issues. Again, that is where my anger is directed---to those who have artificially kept down the supply.

Thomas Sowell discusses this issue and the chutzpah of many of the whiners (including many politicians) who are largely responsible for the reduced supply:

Ironically, the people who are making the most noise about the high price of gasoline are the very people who have for years blocked every attempt to increase our own oil supply. They have opposed drilling for oil off the Atlantic coast, off the Pacific coast, or in Alaska. They have prevented the building of any new oil refineries anywhere for decades.

They have fought against the building of hydroelectric dams or nuclear power plants to generate electricity without the use of oil. They love to talk about their own pet "alternative energy sources," without the slightest attention to what these would cost in terms of money, jobs, or our national standard of living.

Even when one of their pet "alternative energy sources" -- windmills -- is proposed to be built near them, suddenly it is not right to spoil their view.

Sadly, many Republicans who are supposed to understand much better than their opponents the basics of economics have joined in the demagoguing. Instead of carping at Big Oil executives, they should be educating the public about he supply problems.

Meanwhile the attorney general in Florida was on CBS with Harry Smith this morning mentioning the various anti-trust laws that may have been breached by the Big Oil Companies in reaching these current prices. he claimed that the mergers of oil companies created monopolies. However, he then mentioned the American oil companies. There were more than 1. There were more than 4. But, he wants more competitors.

Do we ever get more competitors anywhere when industry is heavily regulated? Government regulations generally result in decreased competition---look at minimum wages (reduced employment), labor unions (fewer openings for newcomers), licensing (fewer new businesses), and on and on...

Back to Sowell:

No matter how big American oil companies are, there are other oil companies around the world and the price of oil is determined in international markets. As for investigating Big Oil, that has been done time and again already, with nothing to show for it.

Is it rocket science that, when huge countries like India and China have rapidly growing economies, their demand for oil goes up by leaps and bounds? Is it rocket science that, when demand shoots up but supply doesn't go up as much, prices rise?

Prices are a symptom of an underlying reality. Politicians can seize on the symptom and even pass laws dealing with it, without changing the underlying reality.

Last, the price of the gasoline is inflated largely by taxes. If politicians truly cared about the cost to the public, they would temporarily reduce the taxes per gallon. That could drop the price down by 45 cents per gallon. Here in NJ do not expect Governor Corzine to budge on the NJ and fed combined 33 cent tax per gallon (as of 2003). BTW, Florida pays a 50 cents in combined taxes and NY pays 63 cents in combines taxes. If only I could fill up in Alaska (26 cents in combined taxes).

Monday, April 24, 2006

The "Gorey" Truth?

Mark Steyn disputes Al Gore's movie "An Inconvenient Truth", his latest enterprise in destroying enterprise, and summarizes the history of the pseudo-climatologists in Nothing to fear but the climate change alarmists :

Remember what they used to call "climate change"? "Global warming." And what did they call it before that? "Global cooling." That was the big worry in the '70s: the forthcoming ice age. Back then, Lowell Ponte had a huge best seller called The Cooling: Has the new ice age already begun? Can we survive?

The answer to the first question was: Yes, it had begun. From 1940 to 1970, there was very slight global cooling. That's why the doom-mongers decided the big bucks were in the new-ice-age blockbusters.

And yet, amazingly, we've survived. Why? Because in 1970 the planet stopped its very slight global cooling and began to undergo very slight global warming. So in the '80s, the doom-mongers cast off their thermal underwear, climbed into the leopardskin thongs, slathered themselves in sun cream and wired their publishers to change all references to "cooling" to "warming" for the paperback edition. That's why, if you notice, the global-warming crowd begin their scare statistics with "since 1970," an unlikely Year Zero which would not otherwise merit the significance the eco-crowd invest in it.

But then in 1998 the planet stopped its very slight global warming and began to resume very slight global cooling. And this time the doom-mongers said, "Look, do we really want to rewrite the bumper stickers every 30 years? Let's just call it 'climate change.' That pretty much covers it."

The hysterics should be comical except he is taken seriously by many Boomers and Greenies who find a leader for their religion.

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