Or fund a few mandatory job education programs for perennial welfare recipients.

Indeed. That's another side that gimpy is missing - we're sending US money out of country for a product which we could just as easily get here using said dollars.

Which means ... jobs, higher tax revenues, etc.

False. The price of oil is driven overwhelmingly by speculators. Institutional investors increased their investments in commodities from $15 billion in 2003 to between $250 and $300 billion in 2008. If 16 to 20 times more money is chasing the same relative supply (I doubt supply had increased 16 to 20 fold in those 5 years), then the price necessarily has to become inflated. And that has absolutely NOTHING to do with how much oil is being pumped out of the ground. It's supply and demand alright - the supply of investors all demanding futures contracts! In January 2006, ICE Futures in London introduced a futures contract for West Texas Intermediate crude. U.S. based investors could route their trades through London so as to avoid coming under the Commodities Futures Trading Commission's rules against speculation. Fun activity - chart the price performance of oil in 2006 (around $60/bbl) to today (around $100/bbl). To ignore the role of speculation as the driving force behind oil prices is to ignore reality.

Oil was trading at around $112/bbl two weeks ago. Now it's around $97. Did worldwide supply increase 15% in two weeks? Did worldwide demand decrease 15% in two weeks? That'd be one amazing feat if it had.

They do the only thing they CAN do. The only way they can influence oil prices, even if its to less of a degree than speculation, is to curtail supply. That is not a piece of supporting evidence for your case.

This isn't a Blue Team or Red Team issue. Quit looking at it through the lens of politics and look at the facts.

That's funny, mookie - you DO know what commodity speculation IS, right? More specifically, futures trading?

You DID know that prices in futures trading rise based upon FUTURE delivery dates and expected ability to meet that demand, right?

There's no doubt that speculation is a driving market force, but even THAT is based upon the principle of S&D. How again would increasing domestic production not impact the commodity?

I am a financial analyst at a securities firm. There would be a problem if I didn't.

You DID know you misunderstand how commodities futures contracts operate, right?

Futures contracts in the vast majority of cases don't end with physical delivery. They are settled by cash. So no, futures contracts are not limited by the amount of physical oil available for delivery on the contract's expiry date. Do you think Goldman is having barrels of crude dropped off at 200 West in NYC?

This is much the same as how credit default swaps (the unregulated derivatives that were a major cause of the financial crisis) worked. People traded the CDS contracts whose total value exceeded the underlying value of the bonds they were supposed to be insuring.

And you still didn't answer the question. Oil was trading at around $112/bbl two weeks ago. Now it's around $97. Did worldwide supply increase 15% in two weeks? Did worldwide demand decrease 15% in two weeks?

Sure corps see taxes as part of overhead, unlike most small businesses in american that don't, because of much stronger competition to survive.

But when will people get it, you could raise or cut corporate tax rates to zero and nothing would change, it's all about regulation. Thanks to our government, mostly the GOP corporate america doesn't work for america in a global economy.

The problem is as always, the GOP would under regulate, the Dems over, no one seems to have enough sense for proper regulation.

In the end the total maddness is all about government wanting as much power over the people, both parties are equally guilty.

What Congress needs to do is look at all subsidies.

At the time the subsidy was approved, there had to be a justification. Subsidies are usually granted to encourage research/development/production. In rare cases it is to discourage production.

All subsidies should be subject to a zero level review. If the original subsidy justification is no longer valid, then the subsidy needs to be stopped.

This is the problem with government programs like subsidies. They are easy to start, but hard to stop. The reverse needs to be true.

The trick is that what they are talking about is a tax deduction not a subside.

It's like the home mortgage deduction, they want to encourage a certain behavior. Home ownership, no home loan than no deduction.
If you were really serous about raising money you'd eliminate this deduction.
Course you'd have a small revolution on your hands but you would have more money.

What this deduction is doing is to get more domestic oil production, not a bad thing. If they don't spend any money on domestic oil production than they get no deduction.

The fact that the state and federal governments won't let them drill is a minor glitch in the plan.

No matter who you cut it this is all a big smoke screen.

Platapus, as far as subsidies go you are correct. There are many of that should be reviewed. "Easy to start, but hard to stop" holds true or almost all government programs. Tax deductions and subsidies and very much the same thing, deductions the government doesn't get taxes. Subsidies the government gives away tax money. Same horse different color.

Magic

I am not sure I would want to eliminate ALL of the deductions. I am, however quite firm that the subsidies need to be reevaluated and hopefully removed.

Here is a pretty good article that explains the deductions under consideration. Some of them seem legitimate

http://www.accountingtoday.com/news/...s-58330-1.html

Well I also think it's sad they're using the subsidies as a gun held to the head of america. They're making HUGE profits, but they pretend that if their tax beaks go away that they'll have to raise the price. essentially holding us american Taxpayers hostage for their cushy tax breaks. Personally, I say take away the breaks and let them try to raise prices, and then we haul them in on price gouging and profiteering, because honestly thats what it would be.

Exactly how huge? I ask because I honestly don't know. How much of what they make goes into production costs, paying employees, funding research, and other operational odds and ends? How much goes into shareholders pockets? People buy shares of the company expecting to make a profit themselves. Are we talking about the CEOs again? How much of the money they charge actually stays with them?

For every gallon you buy, 18.4 cents goes to the Federal Government. Where I am, the state takes another 24.5 cents. That means that a motorist here in Utah is paying 42.9 cents to the two governments. I don't hear you yelling about the obscene profits the government is making, mainly because they spend far more than they take in, which truly is obscene. But the businesses are the bad guys and the government is the good guy, so it's okay for them to do whatever they want, as long as the bad guys don't get away with something.

I'd still like to know how much profit is too much, and how much they actually make.

Well, let's just say I hope your clients know that you believe a supply infusion won't lower prices.Yes, I did indeed know that. Believe it or not, my profession requires a fairly rounded knowledge base regarding economics as well. No, of course not. Nor did I ever imply that. Or, at least, I figured that the people engaging in the discussion could make the OBVIOUS distinction between week-to-week commodity trading and the more long-term impact of an increase in that commodity's availabilty. My bad.

The difference is the PERCEPTION of availabilty (which is largely subject to reality).

Your argument: because oil is set by Wall Street increasing production and availability doesn't mean anything.

My argument: increasing production and availability DOES have an impact, and that impact influences Wall Street.

And, ironically, while you accused me of seeing the discussion through political lenses (although I sided with a bit of BOTH sides here), you are the one taking up the cause of the particular party you unwaveringly align yourself with. So wait - the political one is the guy who thinks BOTH sides have a point, or rather that simply their predeterimined one is always right in all scenarios. Cute.

I set up a little chart here that shows profit margins across a few representative companies in different sectors. You can see XOM (ExxonMobil, which was the first one I thought of) has a profit margin of 9.34% for the first quarter of this year. That's not too out of line with some of the other companies...Boeing, JP Morgan Chase, American Electric Power, etc. Look at Microsoft's profit margin...wowee!

Even though their net margin is about where other companies' is, I'm in favor of taking their most egregious tax breaks away, just simply because I don't think we should be giving tax breaks, bailouts, handouts or subsidies to any company.

And I consider that a fair and honest answer, one I can support wherever discussions may take us.

Not what I'm saying at all. My argument is that speculation comprises a larger percentage of the market price of oil than supply and demand factors do. You miss the point. The main driver of oil prices is speculative activity. Don't you think a 15% price swing is noteworthy? Since we've ruled out any major supply or demand shocks in that two week period, that necessarily means that speculative activity has the ability to move a market 15% in two weeks. That's HUGE.

No, that's not my argument at all. My argument is that prices are more influenced by speculators than supply. Don't paint this as an all or none argument.

And my argument is that the people that believe the panacea to high oil prices is to increase supply will be disappointed when they see that a flood of supply would not translate to a major drop in prices. Curtailing speculation by re-instituting rules that worked since the 1930s through the early 2000s would be a much more effective, not to mention CHEAPER and FASTER way of bringing down oil prices.

yes, because that money goes to the roads we drive on and other infrastructure that we use, not some CEO trust fund. You guys act like when the government takes money in taxes it just vanishes, but in reality it goes to programs we use, or could use every day.
I might also add, My state, Michigan, Pays more into the Federal Pot for roads than we get out. You can thank me later for fixing your streets in some state i've never been to.

Wow, mookie, we are so far off its almost unbelievable.Yeah ... except that - wait for it - speculation is DRIVEN by the very factors that would influence supply and demand.

Geez.Yeah, it's huge if you're playing in the ballpark of two weeks. But you're a financial guy - you should be aware that trends are not set in weeks, and one of the primary influences of trends is the perceived stability of the market.

Furthermore, I would think you'd be acutely aware that a 15% MAJOR two week blip is hardly even noteworthy when one is looking at a commodity's performance over an annual or even semi-annual trend.

So no, I didn't miss your point - I just failed to see it as relevant when we are discussing the long-term infusion of a commodity into the market.I agree that it's not an all or nothing thing. In fact, I'm pretty sure I specifically said that I agree that speculation is a driving force in the market.

HOWEVER, my point is that speculation ITSELF is driven by supply and demand. I hope that's more clear now.Here's why I disagree. A flood of supply WOULD translate to a major (20% or more) drop in prices. For one, foreign companies will still have access to our markets, but they would have to incentivize the sale of the commodity. For another, the dollar remains the world's reserve currency, and despite its weakening state, access to it is still coveted. Suprise. I actually do agree that speculation is a problem, because it is ultimately a fiat representation of an already fiat currency. I believe that long-term speculation is fairly harmless, but the ability to get in and get out artificially inflates prices.

That being said, the driving forces behind the motivation to get in and out must be noted. When you see the prospect of a sudden reduction in supply, money is dumped in to the commodity artificially increasing value. That value is then sold off causing an artificial return to normalcy, or lower.

Furthermore, the drop in the price of crude has been met with a drop in the price of gasoline, although it is certainly not to scale. Yet, that only serves to prove my other point, that a two week drastic change is merely a blip long term.

Looking at that graph big oil doesn't seem to be quite so profitable.

Better we should tax Bill Gates.
The thing is that these profits go someplace and there are millions of Americans who hold stock in pensions 401K IRAs etc. Cut corp profits and cut all these American's investments.

Nothing happens in a vacuum. Pull one leg of the octopus and the other 7 legs react.

Here are some thoughts on the bill in question.

";The bill would modify the foreign tax credit rules applicable to major integrated oil companies. U.S. taxpayers are taxed on their income worldwide, but are entitled to a dollar-for-dollar tax credit for any income taxes paid to a foreign government."
This is a good thing, what we have now leaves the door to abuse wide open.

The two sections on Section 199 deductions sucks big time.
The first part will inhibit exploratory and production drilling. Section 199 is a very big incentive for investment.

The second part about limiting IDC Section 199 might be ok but if it propagates to other industries would be a disaster. Once you set a precedent it sticks around forever.
The problem is IDC are not capital investments. These are recurring business cost.

Section 199 is important to development as that is when you need something to offset the high cash outlay it requires. The long term tax won---8217;t be much different verses capital investment but short term it makes a big difference.

With out Section 199 my business would have been much smaller. I could not have afforded to expand. I would assume that this also applies to big companies as well. Yes big oil has the capital on hand for these things but with the energy situation as it is why put road bolcks on new development?????

Percentage depletion is a mixed bag but would hit me in the pocket book very hard.
I collect gas royalty income and the depletion allowance is, give or take, $850.00 a year.
So this isn't just a tax on big oil at all. If all royalty owners are exempt now it won---8217;t be too long before they aren't Having said that I do think that the percentage depletion needs to be revisited.

tertiary injectants are a cost of doing business not a capital investment.
Talk about inhibiting oil production, come on give me a break. This has the same effect as the Section 199 thing.

I have a little insight into all this as I have land with 3 natural gas wells on it and they are talking about a fourth.

---8220;All of the savings realized as the result of the bill---8217;s elimination of the tax breaks and other subsidies would be devoted to deficit reduction.---8221;

This is the biggest pile of BS I have ever seen(well maybe not) Put money into the government coffers and they will spend it one way or the other, look at Social Security.

They took our cold hard cash and spent it and gave us IOUs. Now they can't pay the IOUs without getting more cold hard cash with no guarantee it will pay the IOUs.

This whole bill is a crock.

Magic

Edit Don't know what happened to the formatting on this. Did it on a word processor and now cant correct it?

How? If speculators don't take delivery or use oil in any fashion, then the amount of supply is immaterial to them. They are simply in it for the price changes. Supply and demand factors move the markets, sure, but those moves are magnified by the speculation aspect. Volatility is intensified.

Again, you miss the point. A price movement of that much in two weeks means that the market is extremely volatile. Volatility is bad for gas prices. Volatility is great for traders.

You say look long term. I say now we're going in circles, which means it's my last post in this thread. Look at a chart of oil prices. Look at the performance since 2003. Since 2006. Since I've already pointed out why those times are significant, I'll not repeat myself.

If we indulge ourself in the fallacy of false choice and say our only options are to A) increase domestic supply or B) re-institute appropriate curbs on speculation that worked for decades, I'm going to take the option that doesn't require companies to invest billions of dollars for something that in 5 to 7 years will lower prices a little bit, but does nothing to address the volatility in the market. I'm going to take the option that can be done in a year or two and has an immediate and greater effect on the market.

Thank you and good day.

I don't think Option A was ever intended to be a viable choice to lower gas prices. It was simply political Grand Standing By the Republicans when they wanted a presidential bid, and also an excuse to take to heat off their buddies in wall street and oil friends who are making a buck off of these artificially inflated prices.