Friday, April 27, 2007

Pay no attention to the guy behind the curtain


Well, here we go again. The Democrats are proposing a "windfall profits" tax on oil companies. Gas prices, you see, are on the way up. Americans love to whine about high gas prices. Americans also don't know squat about oil company profits and profit margins, nor could most Americans write a cohesive paragraph on the role of supply and demand in setting prices in the marketplace. When oil companies post their huge profit figures the leftist media is eager to tell the world. Tell me, when is the last time you read a story about oil company profits that contained any reference to profit margin? Yeah .. you're right. Virtually never.

So ... ripe ground for Democrat demagogues. Slamming the very free enterprise system that brought us our incredible standard of living in this country is no problem for a Democrat who wants to exploit the economic stupidity of the American people.

Claire McCaskill is a Democrat senator from Missouri. Yesterday she was sounding like a high school drop out. To paraphrase this brilliant Democrat: "Here's what I don't get! Gas prices go up, and profits go up! I don't get it!" Yeah, Claire, I'm sure you don't.

Now .. .did Senator McCaskill mean profits or profit margins go up? Ask her that question and wait for the big "huh?" Look, Claire. Let me try to explain this to you. The reason gas prices are going up is because the demand for gas is going up and the supply is not rising to meet the demand. When the demand goes up you sell more gas. With me so far? Ok .... concentrate here for a moment. The oil companies make a certain amount of profit on the sale of every gallon of gas. Right now that figure is around seven cents. If the demand goes up you sell more gas. If you sell more gas you make that seven cents per gallon on the additional gallons you sell because of the increased demand. This means your profit goes up. See how hard that was! Now ... I don't want to fry your brain with too much information here, but even though the profits may be going up with the increased demand, that doesn't mean the profit margins are going up.

I'd better stop here. We don't want to give the brilliant Claire McCaskill too much to think about right now. Her mind is on getting back to Missouri for the weekend so that she can tell all her friends at her town hall meetings about her plans to bring these nasty oil companies under control.