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“Windfall” Profits Tax on Oil Would Slow Flow
...Despite the industry’s above-average risk exposure, Big Oil is not extraordinarily profitable. According to Business Week and Oil Daily, average industry earnings were 7.7 cents per dollar of sales in the second quarter of 2005, also a time of relatively high gas prices. During that same quarter, by comparison, banks earned 19.6 cents; pharmaceuticals 18.6; software and related services 17; semiconductors 14.6; household and personal products 11.3; insurance 10.7; telecommunications 9.6; food, beverage and tobacco 9.4; and real estate 8.9. The corresponding figure for U.S. industry as a whole was 7.9 cents per dollar of sales.

Oil company revenues may be running at record levels, but so is the cost of the industry’s most important input, crude oil, selling on global commodity markets nowadays for about $60 a barrel. Only a few years ago, during Asia’s economic crisis, it was going for $9.40 a barrel....

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Inherit the Windfall
The defense of oil profits we'll probably never see

...We would like to thank you for giving us the opportunity to address this august body, but, frankly, being summoned for a Grand Inquisition and threatened with the confiscation of our so-called windfall profits is not our idea of fun.

Yes, we all made record profits this past quarter. We are proud of this achievement and, indeed, in the future hope to surpass it. Our survival and success depends on producing value for our investors, most of whom are ordinary, middle-class Americans—your constituents, as a matter of fact—who invest in our stocks through their pension funds or 401K accounts.

Our aggregate profits are so large because we have huge sales. But our profit margins—the more relevant measure—are below the overall Standards and Poor industry average. Exxon Mobil, the most profitable company among us, posted $100 billion in sales last quarter —the first American company to hit that mark ever. But its profits were $10 billion—hardly a margin that suggests the "price gouging" that some of you have accused us of.

In fact, the oil industry's margins are well below those of Gannett, the largest newspaper corporation—and no doubt far, far below those of Fox News, whose pandering populist anchor, Bill O'Reilly, maximizes his company's profits by questioning our right to maximize ours. If you really want a reliable revenue stream, why not tax windbags instead of windfalls? ...