"The democrats know what needs to be done..."
"I want to take those profits..."
http://www.youtube.com/watch?v=j1PfE9K8j0g
The more I hear about ideas like a windfall taxes as the means to energy independence, the more optimistic I am that McCain has a chance in November. According to 2005 Tax Foundation data, the oil companies over time have paid 3X more than their profits in taxes.
To me, it looks like they already are taking those profits.
http://www.taxfoundation.org/news/show/1168.html
Before rushing to create a new federal tax, lawmakers should ask two questions:
(1) Do oil companies currently pay too little in taxes compared to profits?
(2) What was the effect of the last windfall profits tax enacted in 1980?
The answer to the first question is that over the past 25 years, oil companies directly paid or remitted more than $2.2 trillion in taxes, after adjusting for inflation, to federal and state governments—including excise taxes, royalty payments and state and federal corporate income taxes. That amounts to more than three times what they earned in profits during the same period, according to the latest numbers from the Bureau of Economic Analysis and U.S. Department of Energy.
These figures do not include local property taxes, state sales and severance taxes and on-shore royalty payments.
The answer to the second question, according to the Congressional Research Service (CRS), is that the 1980s windfall profits tax depressed the domestic production and extraction industry and furthered our dependence on foreign sources of oil.
Have any of you taken the time to listen to the Senate hearings held on 4 June and can be listened to on C-SPAN web site? There are other dimensions that ought to be folded into this type of discussion.
Pattsi Petrie
On 15 June, C-SPAN, State of Oil Production, the entire hearing. http://www.c-span.org/
Pattsi Petrie
And you care about oil companies... why? Is this like a moral issue, protecting oil companies from some kind of injustice? You must really be dedicated to justice, even justice for the wealthiest and most powerful people out there! I am saddened how throughout history these people have been neglected.
Sarcasm aside, higher taxes on oil companies will just be passed on to consumers, so we can buy 7 dollar gas instead of 5. Oil needs to wake up and be proactive like the tobacco companies and regulate itself.
Not as easy as the right wing 'cut taxes' mantra or 'magic market fairy' would have you believe.
Let us assume for a moment that the world really has reached peak production of oil. (Peak meaning we will never produce more WITHIN A SINGLE YEAR than we have to date. And over time will produce less and less in each succeeding year.) If you are an oil company in the US, what would you do?
You could invest heavily in future production. Hm. Current costs rise. But the prospects for new, large, and inexpensive to produce oil fields is vanishingly low now. Things like oil shale and new deep water discoveries are years away from production and even then will not make up for the depletion rate of current fields. And the margin will be very low even if the price continues to rise because production costs will be so high.
You could invest heavily in alternative energy sources. Doesn't seem like a winner if you are an oil company executive. Why potentially undercut the price you are getting now? And potential profits are years away. And there are lots of competitors with very few barriers to entry. An actual market. Hm. Don't want any of that.
Or you could realize that you are sitting on a historic moment in time. Your margin will never be higher than it is right now. You can sell off the last of the cheap oil in declining fields at very high prices. Prices which will go only higher because demand will likely always exceed supply signficantly in the future. (And you certainly don't want to change that.)
When the sh$t really hits the fan there will be plenty of government subsidies coming your way to increase your operating profits if you go after the expensive to produce oil then. Probably enough to increase your profits to close to what you have become accustomed to today.
And in the meantime you can start getting ready now for being a smaller but equally profitable company. As the supply shrinks, so will the industry as a whole. Who would want to build new refineries now? And honestly, why invest billions in 'potential' oil fields with costs of production that come even close to current prices. Let the prices rise first. THEN you can invest in producing more oil. And if you play your cards right and keep alternatives from being developed, pesky little things like global warming and environmental concerns will just disappear. Just like the magic market fairy promised.
Just taxing away these windfall profits doesn't help unless you use those dollars in ways the oil companies will not. Build rail. Develop alternative energy sources. Ease the transition away from cars. Ease the transition away from the current suburban organization of society. Do something about our current high energy approach to agriculture.
These high gas prices are:
With no gov't intervention, all these "good things" have happened because of people reacting to prices. Markets work.
Anon may be right - maybe oil companies won't spend their profits the "right" way. So what. Let them pay it all out in dividends to stockholders. These stockholders can then invest in technology they think will be most wanted by Americans, which just coincidently will be stocks that will make big returns. Alternative energy, railroads, urban condos, ??? I trust the collective wisdom of investors more than the feds to make this call.
- Go ahead Arvid, I know what's coming :-)
- Go ahead Arvid, I know what's coming :-)
Good, I'm glad you're aware of your errors in thinking :-)
You say "with no government intervention", yet in other threads many have complained that the government is driving the price up because of their "excessive" taxing of gas, such that supposedly only $0.09 is profit for the oil companies (a number which I'd like to see some real, third-party credible evidence to). I'd say the market isn't working as intended, and it is the taxation by the eeeeeevil gub'mint that is driving people to do that.
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At some point we have to trust the government. - redstatewannabe on 2008-06-12 at 1:14pm
If total trust in gov't was a good idea, communism would have worked. But I am not an anarchist either. It all is a matter of what you want your gov't to be doing. Protecting citizens - I think yes. Making 10 year energy plans - not so much.
let me add that taxes on gas may have the side effect of influencing people, but I don't think that was ever the intention of the feds (or states and locals) - it is all just a money grab. You can't get elected in America promising to tax gas so much that people won't want to use it.
Don't think only of the US. Just relying on price 'signals' means that while a few less people are buying SUV's (but still driving cars), and more people are using mass transit (in many places approaching its capacity and where will more come from) and thinking twice about where to move. But it also means that we are headed for famine and other hardship in the rest of the world for whom using a little less oil can mean the difference between life and death.
"There are other dimensions that ought to be folded into this type of discussion."
You are correct. I did not elaborate that stockholders took significant risks when investing in these companies and now their reward is going to be flat-out robbed. What justifies this, a large amount of profits? A certain % of sales. A certain % of profits relative to assets. Are they paying less taxes relative to their profits than other companies? If it's a huge company and they are profitable, the profit numbers will be larger.
The findings clearly show that the oil companies are being taxed excessively already. I have not seen any impressive metrics to support any logical reason to nationalize oil profits. They are paying their taxes and investing heavily to support demand.
"If total trust in gov't was a good idea, communism would have worked."
Chavez and Putin should be taking notes on Obama and Hillary. Why run the company yourself when you can have a lot of investors assuming the downside risk and you can overtax the oil companies and then throw in a windfall tax on top of it if they are successful? The american socialism model seems much more logical.
Interesting interview on Wolf Blitzter with Chevron CEO...
http://www.cnn.com/2008/US/06/18/chevron.blitzer/index.html