Posts tagged ‘Via Tim Worstall’

Economic Morons in Europe, but is Congress Much Better?

Via Tim Worstall, Gawain Towler reports this bill in front of the European Supreme Soviet Parliament:

Written declaration on fixing fuel prices
The European Parliament,"“ having regard to Rule 116 of its Rules of Procedure,
Whereas we are witnessing an unprecedented rise in fuel prices, and
this scandalous surge is having a devastating effect on economic
activity in various sectors: transport and other services, industry,
agriculture and fisheries,
B. Whereas in Portugal, the major oil
companies in the first quarter of this year, vis-à-vis the first
quarter of 2007, made net profits of 22.9% (GALP), and consolidated
profits of 36.5% (REPSOL) and 63.4% (BP), which were fundamentally the
result of practising speculative pricing, as a result of the
speculative valuation of oil stocks
bought at lower prices,

Calls for the establishment of a tax, for each Member State, to be
levied exclusively on these profits so as to bring them back into the
coffers of the Member State. This tax should be paid within 60 days
after the end of each quarter, with the value and scope of the levy
depending on the readiness of the oil companies to reduce their
speculative gains thanks to the 'stock effect';
2. The revenue
generated by this tax should be returned on a proportional basis to the
various economic sectors in each Member State;
3. Instructs its
President to forward this declaration, together with the names of the
signatories, to the Council, Commission, and Parliaments of the Member

"depending on the readiness of oil companies to reduce their speculative gains thanks to the 'stock effect'"??  What the *&#$@% does this mean?  What economic concept are they even trying to get at?

Further, I was amazed at the statement that BP made net profits of 63.4%.  It took me a while to figure out that this was the quarter over quarter profit growth, not the profit margin.  I can't tell if these guys are just ignorant or if this is a translation issue into English, so i will give them the benefit of the doubt.  In case you are wondering, BP's net profit margin in the first quarter of 2008 was 8.3% of revenues, which in the grand scheme of industry is actually below average.

One reason fuel prices are so high in Europe is because the government takes more than half of fuel revenues in taxes:

Fuel taxes are also the central issue for truckers in Europe, because
they account for a large portion of the retail price of fuel. Unleadedgasoline
sold for $8.65 per gallon and diesel for $9.62 per gallon Tuesday in
Britain, which charges a flat $3.77 per gallon in fuel duty and imposes
a 17.5 percent consumptiontax on the total price

So, 61% (44% from the $3.77 plus the 17.5%) goes to government and 8.3% goes to the BP shareholders.  So lets tax BP shareholders more to lower the price!