Windfall Losses Rebate?

When oil prices were rising, oil executives were called in front of preening Senators to explain why -- dammit why -- they were making so much money. These "windfall profits" were deemed to be worthy of special taxation. After all, why should the oil companies get to keep the money they made?

I wonder if Debbie Stabenow will have a hearing to discuss tax rebates for big oil. It seems their profitability is hurt by falling prices as it is helped when they rise.
The Wall Street Journal reports:

Even before the steep drop-off in prices, earnings had been blunted by side effects of the commodities boom. Oil-field costs have skyrocketed for many projects because of higher demand for everything from steel to software among energy companies eager to cash in on the boom. Competition for new prospects has heated up, ratcheting up auction prices for fresh exploration acreage.

If oil prices stabilize or drop further, cost inflation could also subside. But costs generally take time to catch up with swings in commodity prices. That poses a growing challenge to profitability in the short term.

Neil McMahon, a London-based oil analyst at Sanford C. Bernstein, says recent trends of lower commodity prices and higher costs mean quarterly results this time around aren't likely to offer much positive surprises for investors. In a note to clients Friday, he said he expects to see further evidence of cost pressure when companies report this week.

Commodity boom huh? Sure glad I didn't jump in on that. (Kidding, kidding.)

Oil and Energy Posted by jk at October 24, 2006 10:20 AM