Our View - Friday

Follow the money

Putting oil company profits in context

Gasoline prices are high again, as are oil company profits, which can only mean one thing — a flurry of “price gouging” and “windfall profits” measures are flying around Capitol Hill, as demagogues assuage public anger by pointing the finger at the wrong culprits.

Disregard congressionally imposed drilling moratoria on domestic oil and gas fields in Alaska, the Gulf of Mexico and on the outer continental shelf off both the east and west coasts (bans, by the way, that shift the burden of domestic drilling onto the Rocky Mountain region). Disregard a U.S. regulatory climate that makes it hard to build refineries, pipelines and other critical energy infrastructure. Disregard federal and state gas taxes, which could be cut tomorrow if politicians really wanted to give motorists relief, but which won’t be cut because politicians and governments are addicted to revenues.

In short, disregard everything politicians have done to drive up prices and focus your ire on evil energy companies and their allegedly “obscene” profits. That so many Americans fall for such diversionary tactics is proof of the public’s inability to connect regulatory causes with market effects.

But no matter, today we want to focus on profits, which make free market capitalism work and America’s economic prosperity possible, but which increasingly are condemned as “criminal” when certain industries are involved.

We admit that Exxon Mobil’s $9.3 billion profit in the first quarter is a staggering sum. And when taken out of context — which it almost always is by the profit police — it could even seem “obscene.” But for an industry that operates on such a vast scale, dealing in a high demand commodity such as oil, big profits (or big losses) are to be expected. And what is profit, really? Who does it benefit and where does it go? Once we ask these questions a little more context creeps in.

Profits aren’t stashed in a top-secret vault somewhere, to be hoarded by cigar-chomping fat cats. These funds are plowed back into the company, and into the general economy, in a hundred ways most people don’t think about.

In this case, they first ensure that one of America’s biggest companies stays in business — which we judge a good thing, given all the jobs, economic activity and tax revenues generated by the use, transport and sale of petroleum products. The alternative to profits is losses, which (we hope) we can all agree are a bad thing, but where the line between acceptable and “obscene” profits falls is subjective.

Profits also are used to reward shareholders and investors — including institutional investors trying to generate a good return for the pension plans of millions of Americans (many of whom may not even realize they’re invested in “big oil.”) This, too, is a good thing, since such rewards encourage more investment, not just in big companies but in small and medium-sized ones as well.

This $9.6 billion acts as a shot of adrenaline for the economy, boosting entrepreneurship, job creation, taxable incomes, and economic growth — things from which millions of nonshareholders benefit. Reduce the profits and you reduce the incentive to invest. Rewarding risk-taking by investors encourages more investment, which creates more companies, more jobs, more taxable revenue streams, etc.

And what do shareholders and investors do with their “windfall”? Much of it, as noted, is reinvested. But even if they decide to blow it on a vacation to the Bahamas or a second home or a yacht, it’s put to some productive and beneficial use — just ask the bar owner in the Bahamas selling $8 piña coladas, the home builder or the boat-maker. And ask the people employed by the bar owner, the homebuilder and the boat company. Follow the money: some of the $9.6 billion lands in their pockets as well.

Finally, these profits are plowed by the company back into developing new technologies — technologies that can squeeze more oil and gas out of wells that were thought to be tapped out, perhaps, or technologies that further reduce the environmental impacts of drilling. The profits also go into the search for new oil and gas fields, ensuring that a commodity on which this country relies keeps flowing. And we want it to keep flowing, don’t we?

Smart companies might use these profits exploring ways to diversify, since even big oil and big gas want to be part of the energy economy of the future, whatever it may look like, even as they try to serve the needs of the energy economy of today.

These are a few of the most obvious reasons why profits should be cheered, not jeered. Those who want to punish profitmakers for their success are cutting off their noses to spite their faces, since the pursuit of profit is part of what’s made America prosperous, free and great. Americans should turn their backs on politicians who pander to envy and economic ignorance — and get out there and make some “obscene” profits of their own.

There’s no substitute for teamwork

We’d rather drink Drano than serve as a substitute teacher, given all the abuse they’re subjected to. So we appreciate steps the city’s largest school district (D-11) is taking to make these jobs easier. Pinch-hitting for a full-time faculty member, frequently on short notice, and sometimes in a subject which isn’t one’s forte, can’t be easy, so anything the district can do to help substitutes . . . oops — they’re now officially called “guest teachers” — is a plus. They’ll be paid slightly more and have access to the district’s e-mail system, which will improve communications. They’ll also be eligible for teacher training. This should help “make them feel as if they’re part of the team, which they are,” said Dave Schenkel, the district’s human resources director.

It’s still a job for masochists, in our view. But for those who do it for other reasons, it should be a little less of a pain.