Hillary Clinton is calling for a "windfall" tax on energy companies because they are racking in record profits.  Barack Obama says that energy shortages are going to change the way we drive, what we eat, and how we live.  Congress has grilled executives from the leading energy companies saying that these oil corporation are ruining America.  All I have to ask is, have we all lost our mind?  No, we haven't (yet).  I believe that a majority of Americans have some vague notion on how we arrived at this energy crisis.  They understand the basics of supply and demand economics.  The ones who seem to have lost all concept of reality are the dully-elected representatives of the United States.

Lets break down the energy companies' record profits and Hillary Clinton's call for a windfall tax.  Basically Hillary wants to add extra taxes to penalize a company for having a successful business model.  Energy companies drill and pump oil out of the ground.  They then refine it and sell at the market price.  The key to their profit is that last piece of the puzzle -- MARKET PRICE.  This means that they are selling oil at a price set by investors, OPEC, and other market influences.  However, the cost of pumping and refining the oil remains the same.  It's not like $130/barrel of oil is any harder to drill, pump, and refine than $50/barrel oil.  Chevron does not have to build special drilling rigs to extract $100/barrel oil.  Conoco-Philips does not have to reroute pipelines because $120/barrel oil won't flow down their current pipes.  So as the market price of oil soars and the cost of extracting oil remains relatively stable, profits will rise.  It's a basic law of economics -- if you sell something for a greater price than what you pay to obtain it you turn a profit.

Should companies like Exxon-Mobile be panelized in extra taxes because they deal with a commodity that happens to be in huge demand and in short supply?  If that's the case, why stop at windfall taxes for big oil?  Why not tax everyone who makes a wise investment or runs a successful business?  Today it's the oil companies, but tomorrow it could be any company that posts a profit that the government arbitrarily declares is too large.  In reality, successful businesses have already been paying a windfall tax for years.  It's called income tax, capital gains tax, and several other taxes with fancy names that all do one thing -- move money out of the hands of individuals and into the hands of the government.  Does Hillary realize that oil companies already pay BILLIONS in taxes every year?  A single energy company pays more in taxes in one year than what millions of individual Americans will pay in their lifetime.  And the greater their profits, the more money they will pay to the United States Treasury.  That sounds like a windfall tax to me.  Why do we need to add another one?

What exactly would a windfall tax produce or what problem does it solve?  Would more oil become available?  Would gas prices fall for consumers?  How can gas prices decrease if the cost of extracting it increases through additional taxes?  Will the oil companies be motivated to produce more oil knowing that they will be subject to the windfall tax?  It's like telling a baseball player to hit home runs, but if he starts hitting too many the points will go to the other team.  What motivation would an athlete have if he is penalized for performing too well?  Whenever a politician suggests new taxes we have to always wonder what it will solve in the end.  Is it a solution to a particular problem or is it just the government grabbing money for the sake of grabbing more money?

An extra tax on energy companies affects anyone who has diversified investments.  Extra taxes means less profit and less profit means decreased share prices.  As the stock price falls for energy companies so do peoples' portfolios.  If you have any type of mutual fund or retirement account then chances are that energy companies are part of your investment strategy.  So when the government sticks it to those evil oil companies, they are sticking it to every American trying to save for the future.

So why propose a windfall tax at all?  Right now people are angry with the increasing cost of living and the government feels like they need to take action.  But instead of actually proposing practical solutions to our energy problem, our politicians would rather scapegoat the oil companies.  That is a lot easier than telling the environmental lobby that we need to open up more sites for drilling or that nuclear power needs to be a serious consideration.  Actual solutions might upset certain groups and loose votes while unrealistic solutions are mainly ignored by the masses and have no serious consequences.  Throwing out ludicrous proposals is how politicians fall asleep at night.  It fools them into thinking that they are doing actual work.  But in the end saying that we need a windfall tax is about as good of an idea as saying "let them eat cake!"