How about a windfall tax on oil companies?

Robert

Reich, divining no "intestinal fortitude" on the part of the Democrats

for a carbon tax, reckons that a windfall tax on oil company earnings is the

next best thing:

The Dems should propose a temporary windfall profits tax on oil companies

(temporary, that is, until the oil company’s current oil earnings boom

falls back to a normal range), the proceeds of which go into a fund to finance

R&D in non-fossil based fuels. Market fundamentalists who holler that

oil companies should be allowed to reinvest their profits in new oil exploration

aren’t paying attention to the environmental costs. But the windfall

tax should be designed so that, to the extent oil companies do wish to invest

in non-fossil based fuels, such profits are exempt.

It’s certainly politically much easier to soak Big Oil than it is to soak Small

Commuter – especially when commuters see their hard-earned dollars turning

into the largest annual corporate profit ($39 billion) the world has ever seen.

The Globe and Mail’s Shawn

McCarthy has a good story under the headline "Exxon’s ‘outlandish’

earnings spark furor":

Senator Hillary Clinton of New York, a leading candidate for the Democratic

presidential nomination in 2008, took direct aim yesterday at the oil companies’

gains.

"Instead of lining the pockets of big oil, we need a new direction in

energy policy that rewards innovation, creates jobs and reduces our dependence

on foreign oil," she said in a statement…

Democratic Congressman Ed Markey, a member of the House of Representatives

energy committee, called the record profits "outlandish," saying

they came "at the expense of the driving public."…

In its newspaper ads, the company says that between 1991 and 2005, it invested

more than it had earned in profits in order to find, develop and refine crude

oil and natural gas.

Over the past five years, it has invested $82-billion worldwide, nearly a

third of it in North America.

In 2006, however, Exxon spent more on buying its own shares on the open market

than it did on capital investment.

The company spent $25-billion on its share repurchase plan, which was designed

to boost its stock price, while it allocated $19.9-billion for capital investment

in 2006.

The Democrats seem keener on fiddling around with tax incentives for oil exploration

– which are a drop in the bucket compared to oil companies’ profits –

than they are on a windfall tax. Maybe a windfall tax makes it easy to accuse

them of "class warfare". But I kind of like the idea: Make the oil

companies pay for some of the cost of the war which is responsible for so much

of their profits.

Related: If I were an oil company, I might seriously consider selling off my

gas stations for PR reasons. With oil company names emblazoned across gas pumps,

it’s easy to blame the companies for high prices. So spin off the gas stations

as their own entity, a bit like Coca-Cola spun off its bottlers.

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3 Responses to How about a windfall tax on oil companies?

  1. Dan says:

    Why stop with a windfall profit tax? A carbon tax is the best option we have to reduce global warming emissions and our dependence of foreign oil. A carbon tax is politically feasible when combined with progressive tax-shifting; the carbon tax revenues should be used to reduce payroll taxes (if a federal carbon tax) or sales taxes (if a state carbon tax). Polls indicate that Americans are open to a carbon tax. For details, see our website at http://www.carbontax.org.

  2. Alan says:

    Your last suggestion is rather interesting. It would appear that BP has already done something to mitigate the price pinch of petrol to the consumer by selling themselves as “beyond petroleum” and featuring a stylized multi-colored sunflower head. One has to wonder what on earth a sunflower has to do with crude pumped from the North Slope or some other place on the North American continent, refined in the Gulf and tanked off to market. Come to think of it, maybe nobody wonders, and that’s why it works.

  3. HVH says:

    BP’s sunflower actually makes sense, since BP is one of the largest (second to Sharp, I think) suppliers of solar/electric panels to the US. Of course their solar business is dwarfed by their petroleum operations, but “beyond petroleum” is more than spin.

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