Companies with obscene profits - is it immoral?

[Earlybird]

OK - so maybe a bit of a heavy subject for a Friday night, but here goes....many of the oil companies are releasing their financial results, and surprise surprise, they're declaring record profits. Take a look at this excerpt from an American wire service report:

"On Tuesday, ExxonMobil, the world's largest publicly-traded oil company, announced net income of $9.9 billion for the most recent quarter, eclipsing analyst expectations and dwarfing the $5.68 billion reported for the same quarter a year ago. It was the largest quarterly profit ever for a U.S. company.

ExxonMobil wasn't alone. Royal Dutch Shell said today that profits grew 68 percent, to $9.03 billion, last quarter. Earlier in the week, BP announced profits at 34 percent above last year's levels, and ConocoPhillips saw revenue jump 43 percent."

There is discussion among American politicians of imposing a temporary "windfall tax" on these huge profits (the annual revenues from the tax would be returned to the individual taxpayer in the form of a rebate). US lawmakers are also calling for the companies to explain these obscene profits amid muttering of price gouging.

Any thoughts? Do you think it's immoral for price increases (justified by bleating about diminished production/supplies), to result in such extreme profits? Or is it simply good business, and taking advantage of what the market will bear? Should the politicians get involved to prevent this in future? Or is that too much governmental interference?

Figure after a week (or more) of halfterm activities with the children, we all might want to exercise our brains in a healthy (and hopefully civilised) debate...

having obscene profits in itself isnt wrong.

but what they are doing to get those profits may quite likely be. eg having a cartel to keep prices up, employing private armies to keep control of oil fields so that they are kept out of the hands of the governments in the country where they are located, paying huge bribes to ensure that only corrupt governments that wont levy taxes on said oil companies get elected.

It's an inherent problem with the free market. the oil companies' profits are not immoral as such (at least, they're not immoral on one level)because they don't control the market (as in there is no monopoly). Rather, the price is set by how much people are willing to pay.

dunno about a windfall tax/rebate though. think there should probably be some sort of windfall tax, but with the money going to renewable resource research.

senorap, oil prices are determined by the supply which is determined by OPEC. OK, that is not the oil companies, though it is hard to believe that the oil companies just sit back and wait to see what OPEC will say.

they do do the other 2 things I mentioned though

opec don't set the price do they? they just set the quotas. they do have control over the price in that if they set the quotas low the price will go up, but it ultimately comes down to how much people are willing to pay as I understood it. not an economist though (but am interested in such things in a kind of voyeuristic way).

political funding is an outrage, I agree. However I don't believe that alone wins elections. sadly, i think bush won because 30% (or whatever it was) of americans really are that naive/greedy/stupid.

oh right - I missed that word "supply" in your post. my point more succinctly is "why does the supply affect the price?"

I was thinking about 3rd world countries actually, not the mighty US of A! but the cap fits a bit

oh, because whenever theyre talking about oil price on the news, they always link it with the supply, and get all excited if OPEC says theyll release another 10000 barrels.

I'm with Nightynight - it's what they do to generate the profits that is immoral. People have been killed for daring to speak up about abuses by oil companies and corrupt governments. Our government sent Ken Saro-Wiwa, a human rights activist, back home to be murdered by a regime that wanted to silence his criticism of corruption between oil companies and governments.

And then there's the planet, of course... and plans to start oil production in Alaska...

ahh. I assumed US because it's the us that are thinking about the taxes (who bets they don't do it?)

bribery in corrupt regimes is something a lot of big companies are guilty of - not just the oil companies.

SP, supply-price relationship is basic economics. Lots of something = low price, rarity = high price. Like coal and diamonds.

sorry, it was a rhetorical question. the supply affects the price because people (i.e. stockbrokers) will pay more for something that is scarce. Ultimately the price is what they are willing to pay, which is also in part based on what we are willing to pay. we are all partly responsible for the oil companies' profits.

ds's bogies are very rare, but I wouldn't get much for them

sp - yes, I agree it is not just oil companies. I think the reason they stand out as being so bad is because they are blatantly taking a resource that is located in another country, and the local people cant do anything about it. A hangover from colonial days, in Nigeria for example

otoh nike shoes are everywhere but cost a blinkin fortune.

I agree that it is about what people are willing to pay, but while we all can use the car less (I don't drive at all), we still must move around. And that costs - even public transport costs are increasing. Goods must be delivered, and if transport costs are higher, the retail price of those goods are higher. If natural gas prices are high, it costs more to heat homes - you can move the thermostat down, but you can't do without. Some things are optional (or can be cut back), but some can't.

I see red when these companies are so quick to aggressively raise prices, and then annouce huge profits a short time later.

everything can be cut bavck if we completely rethink the way we live our lives.