While oil owners reap record profits
|November 14, 2008||Posted by Jeffery J. Smith under Progress Report, The Progress Report|
While oil owners reap record profits
Most Americans lose some savings and income
Lots of us had our savings tied up in a house — the land, actually — or tied in with Wall Street, or both. Or lost a job or know somebody who has. Its scary. But really, we should know better than to let our future security ride on an unfair economy. Its time to deal with income extremes and lost equity (and has been for a long time). We need to learn to expect an income apart from our labor, to get a fair share of societys surplus, rather than let just a few hog it all. We trim, blend, and append four 2008 articles from: (1) the AP of Oct 30 on Exxon profits; (2) the Kalamazoo Gazette of Nov 3 on farmers costs by Rosemary Parker; (3) the Hutchinson Leader of Minnnesota on Nov 10 by Ardis Tobison on sharing subsidies; and (4) the AP of Nov 7 on home sales by Alan Zibel.
by Jeffery J. Smith, November 2008
While oil companies make out like bandits, the families that grow our food are feeling anxious. But at least the price of land, mistakenly called housing, keeps dropping back down to affordable.
- Exxon posts biggest US quarterly profit ever
Bolstered by this summer’s record crude prices, Exxon Mobil Corp. saw its third quarter gross revenue rise 35 percent to $137.7 billion. The world’s largest publicly traded oil company posted the biggest US quarterly profit ever, $14.83 billion in Q3. The previous record for US corporate profit was set in the previous quarter, when Exxon Mobil cleared $11.68 billion.
JJS: Oil, a part of nature, is far more lucrative for a few than is soil, another part of nature, is for many.
- Farmers hit by rising costs, falling prices, amid floods and drought
Michigan farmers this year first watched heavy, soaking rains swamp their fields, forcing many to plant their crops two or even three times. When rain was needed in August, it never showed. Then worldwide incomes fell, cutting demand for meat, and oil fell, making ethanol not so remunerative; commodity prices, which had been at record highs the past couple of years, took a sudden dip.
Corn, which topped $7 a bushel and pushed toward $8 in midsummer, has fallen back to about $4 a bushel. Soybeans went from $16-plus per bushel in June to just under $9 a bushel now. The current prices are still high by historical standards, but they don’t look so high to farmers who are paying more than ever for everything from fuel and fertilizer to land rent.
The falling grain prices could help ranchers who rely on corn and soy to feed their animals, although many of them have already reduced their herds and flocks because of the high feed prices earlier in the season.
JJS: Income, especially for farmers, can be misleading, once costs are deducted. Below, note how increases in income get diverted into the value (rent or price) of land. Would-be policy-wonks take note: its an iron law of economics.
- Flex leases treated as cash leases under 2008 Farm Bill
During the past three years, grain prices have been at historically high levels followed closely by escalating land rent. Landowners tried to figure out a way to capture some of the grain price increase. Tenants tried to figure out ways to base their land rent not necessarily on the going land rental rate but on a rate associated with the yield and price they received.
This leads landowners and tenants alike to the use of a flexible lease. The flexible lease started with a base rent and then went up according to the tenant’s crop yield and price received. Previously, government subsidies had to be split between landowner and tenant based upon their share in the crop. Now, under provisions in the new 2008 Farm Bill, the subsidy payments will not have to be split between landowner and tenant.
JJS: While the lessened complexity from new legislation may help farmers some, a bigger help would be to get a share of the rise in land values, both rural land and metro land, on an ongoing basis, and not just to farmers but to all citizens. If society as a whole were to share land value — by taxing land, not much else, then paying out dividends to the entire citizenry — then owners would lose interest in speculating in land, and its price would not rise and fall so wildly.
- Pending home sales fell 4.6 percent in September
Pending sales for existing homes fell 4.6 percent to a reading of 89.2. That’s down from an upwardly revised August reading of 93.5. The index sunk to a record low of 83 in March.
It has been above year-ago levels for two straight months; in 2007 September it stood at 87.8. Though the index was 1.6 percent above year-ago levels, much of that gain likely comes from buyers who are snapping up foreclosed properties at discounted prices, as prices continue to sink.
Like the four seasons, economies are cyclical beasts. An unbalanced, unjust economy carries us on a wild rollercoaster ride, while a balanced, just economy would climb and glide much more gently. Wed easily learn to live within its rhythm, as we do with the seasons.
Jeffery J. Smith runs the Forum on Geonomics.
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