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ExxonMobil’s profit more than doubled last year to a record $56 billion, thanks in large part to soaring energy costs over which the company had little control.
Which is to say, Exxon made gobs of money for doing nothing new or innovative. It basically won the lottery.
This renews questions about the utility of a windfall profits tax, particularly in light of Exxon’s stated intention to spend $50 billion on stock buybacks to boost its share price even more.
This will constitute a massive transfer of wealth from U.S. consumers to Exxon shareholders — again, without the company having done much of anything to earn that good fortune.
Exxon Chief Financial Officer Kathryn Mikells credited the oil giant’s performance to “a combination of strong markets, strong throughput, strong production and really good cost control.”
Oh, and California consumers paying an average $6.50 a gallon at the gas pump.
To be sure, there’s nothing wrong with a business being profitable, even wildly profitable. That’s capitalism. There are booms and busts, and companies ride both cycles.
But how much is too much? That’s the question at the core of any discussion of a windfall profits tax.
Put another way, how is it good for society when huge amounts of wealth are transferred from consumers to investors due almost solely to market forces?
Fast-food giant McDonald’s also reported better-than-expected results. But the company said this was due to increased demand for Big Macs and other products.
In other words, it earned its profit not from significantly higher prices but from selling more goods. To me, that’s a legitimate reward for a business.
Exxon and other cash-rich oil companies simply sat down at the blackjack table and got dealt a king and an ace.
And the chips they won came from your stack.
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