[joeltrout]

The Windfall Profits Tax on Big Oil? poll is starting to bother me.

46% of 635 respondents said YES or they are UNSURE.

Only 54% said NO to windfall profits tax on big oil.

Why should Big Oil profits be taxed?

Hey joeltrout, how about drilling in your back yard? After all, no restrictions. Yes, oil companies will pass tax costs onto consumers--this will reduce demand for oil.

Well rdberg1957 I am glad you asked. Here is a little bit about myself and California. I hope this answers your question.

I live within a quarter mile of the ConocoPhillips Los Angeles Refinery Wilmington plant. It consists of 424 acres, processes 139,000 barrels of oil per day, and has been operating since 1919. Every Halloween they paint a 3 million gallon storage tank into a giant jack-o-latern. I can see it from my dining room window and drive-way.

From my kitchen and living room windows I can see the offshore oil platforms in the Catalina Channel. I can also see the THUMS Operation which has drilled more than 1,200 wells. Many times I sit and wonder how much oil might be offshore California. Obviously it is small compared to world production but more drilling would create more jobs, more revenue, and little more oil for the state of California. Remember California is the 3rd largest producer in the United States behind Texas and Alaska. California also has 4 of the top 10 U.S. Fields Ranked by Liquids Proved Reserves.

I also live within a mile of active drilling, reworking, and production. This area has a long history of oil production. I can see Signal Hill also from my driveway. It has been producing since 1921. I can also see the Wilmington Field that has been producing since 1932 and is the 4th largest oil field ever discovered in the US according to Wikipedia.

From my office I overlook the ExxonMobil Torrance Refinery. It was built in 1929, covers 750 acres, employees nearly 800 people, and processes 150,000 barrels of oil per day.

I also work in the oil industry. I negotiate oil and gas leases every day to provide you with oil. Oil is either in everything or ships everything.

By the way, oil companies have not been investing heavily in finding oil. They have been giving their profits to shatreholders and executives.

You forget they are public companies. If they don't please their shareholders then the shareholders can sell the stock and walk which would destroy the companies.

Also where do you think they should explore for more oil. There are only a few areas in the US that they would look at due to most fields are too small for the majors to devote several thousand employees. And overseas they are hitting road blocks such as Venezula, Middle East, Russia, Mexico, etc...

joeltrout

[pup55]

You forget they are public companies. If they don't please their shareholders then the shareholders can sell the stock and walk which would destroy the companies.

I am just trying to follow the logic here:

Here is one possible argument:

a. We need more oil.
b. The oil companies can give us more oil, if they are economically motivated.
c. We should tax the oil companies if they make a profit.

Here is another:

a. We should wean off of oil.
b. The oil companies are giving us oil. We should take away their profit motive, so they will not produce any more oil.
c. We should tax the oil companies to discourage them from making a profit.

Here is another:
a. We need more oil
b. The oil companies can give us more oil, if we can reduce some of their risk, and make them more profitable.
c. We should give the oil companies tax breaks to take away some of the risk. They will be motivated to produce more oil.

Here is another:
a. We need more oil.
b. The oil companies can give us more oil, if economically motivated.
c. We should let the oil companies decide whether to give us more oil or not.
d. If the prices for oil and finished products are good enough, they will make money, and we will have oil. If not, they won't, and we won't.
e. If we give them subsidies, they will make a different decision than they would if we just left them alone. If we tax them, they will make a different decision. Therefore, we should neither subsidize them nor tax them.

Someone can clarify this: The first case, above, is logically inconsistent to me. The rest make sense. Whether any of them should or should not be done is a different issue.

Am I wrong on this? Is the first argument just logically inconsistent?

[joeltrout]

It is a fact that we need oil and will oil in the near-term. Mainly for transportation needs.

You forget they are public companies. If they don't please their shareholders then the shareholders can sell the stock and walk which would destroy the companies.

I am just trying to follow the logic here:

Here is one possible argument:

a. We need more oil.
b. The oil companies can give us more oil, if they are economically motivated.
c. We should tax the oil companies if they make a profit.

Yes they should be taxed but not more because they make a profit. Hundreds of small oil companies went bankrupt for decades before we really started making profits. So now that prices are high and companies are making good profits it doesn't make sense to tax them more just because they had a good year.

Here is another:

a. We should wean off of oil.
b. The oil companies are giving us oil. We should take away their profit motive, so they will not produce any more oil.
c. We should tax the oil companies to discourage them from making a profit.

I agree we need to wean off oil but this is a bad scenario. Without oil our economy and most others will collapse and that certainly is not a good thing in the overall scope. Obviously this can be argued but I think more people will suffer if our economy did colllapse.

Here is another:
a. We need more oil
b. The oil companies can give us more oil, if we can reduce some of their risk, and make them more profitable.
c. We should give the oil companies tax breaks to take away some of the risk. They will be motivated to produce more oil.

This would help with prices and allow the world more time to develop renewables/alternatives. Right now we would be screwed if we lost any major sources of oil.

Here is another:
a. We need more oil.
b. The oil companies can give us more oil, if economically motivated.
c. We should let the oil companies decide whether to give us more oil or not.
d. If the prices for oil and finished products are good enough, they will make money, and we will have oil. If not, they won't, and we won't.
e. If we give them subsidies, they will make a different decision than they would if we just left them alone. If we tax them, they will make a different decision. Therefore, we should neither subsidize them nor tax them.

This makes sense except for the fact that drilling programs take years not days or months. They cannot decide to provide more oil in a couple months. It takes several years or decades. There is a saying when prices are high, oil companies will drill themselves into a bust.

Am I wrong on this? Is the first argument just logically inconsistent?

I don't think you are wrong. I think we need more oil production as soon as possible. Windfall profits tax does not increase oil prodution. If anything it hinders it. We need the oil so that it will give us time to develop renewables/alternatives. The in-between time is what scares me. It has to be an easy transaction or else the world will suffer. Right now it would not be an easy transition. We would be doomed. Literally.

joeltrout

[heroineworshipper]

Enjoy paying your corporate overlord's higher taxes.

[pup55]

I don't think you are wrong

.

All I am saying is, if you want more of something, it makes no sense to punish the people that are providing it.

Enjoy paying your corporate overlord's higher taxes.

I guess there is a fifth argument:

a. We need oil, no matter what.
b. We will pay whatever it takes to get it.
c. We can tax the oil companies, and allow them to just pass their higher costs onto the consumer.
d. The consumer will pay the higher taxes.

[idiom]

But you don't understand. Oil is the essence of evil, that is why it is black and sticks to everything.

Making profit from Evil is like Evil Squared. Therefore is should be taxed like crazy.

[pup55]

Making profit from Evil is like Evil Squared. Therefore is should be taxed like crazy.

This is a logical argument. If you want people to use less of something, you raise its price.

The exact opposite of this argument happened in the US a few months ago. Some of the panderers in the presidential race came out in favor of repealing the federal gas tax.

Here is the logic behind that:
a. Gas prices are high because demand is too high.
b. Lowering the tax will lower the price
c. Lowering the price will cause demand to go up.
d. The price will go up.

One of the brilliant politicians who espoused this idea is still in the race, amazingly.

[MrBill]

Subsidizing energy consumption and taxing oil cos. over and above normal corporate taxes is like smoking asbestos tipped cigarettes. They will get you where you're going a lot quicker.

[ROCKMAN]

Here’s another approach to consider. Let’s stop taxing the oil companies all together. Instead, let the gov’t help finance their operations. If fact, let the gov’t guarantee loans so that the oil companies can buy up oil fields overseas as well as fund newly developing projects. Of course, the oil companies would be required to bring that oil back to the US and sell it for cost plus an adequate profit. This oil would certainly cost far less then what it would be selling for on the world market since there would be no markup at the well head. And the US could throw in a little military security to the mix…something a few other countries might appreciate these days. Additionally, the US could never be outbid for this oil…it would belong to us from the well head to the gas tank. The refiners would be tickled pink: not only would they have a secured source of crude long term but they know what it will cost them. In fact, if the gov't loaned them the money and secured a source of heavy/sour crude they would start building/converting new refineries tomorrow. In the end, the Big Oils (owned by 10’s of millions of middle class Americans) would make a nice profit, the economy would have a much more secure and cheaper source of a commodity that is shrinking globally and the gov’t would probably make a profit itself on the investment.

Ahhh…just a crazy idea. But, then again, this describes the Chinese gov’t policy towards securing its economic future. They’ve been following this business plan for the last 10 years. But what the hell do they know. Their economy is only growing 5 or 10 times as fast as ours.

[3aidlillahi]

Ahhh…just a crazy idea. But, then again, this describes the Chinese gov’t policy towards securing its economic future. They’ve been following this business plan for the last 10 years. But what the hell do they know. Their economy is only growing 5 or 10 times as fast as ours.

Willing to take a 90% pay-cut? Then we'll be on par with Chinese laborers. Then our production costs will go WAY down in all sectors. Thus, we'll be able to pump more and thus 'grow' more. "Sure, in theory, communism works." - Homer Simpson

Also, the guy on the right: your new dental program. And the guy on the right: your medical care.





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I wonder if these plans for taxing the oil companies also involves increasing taxes directly on the oil workers. Bah, it's probably not possible. But if it were, who would think they wouldn't tax 'em?

[ROCKMAN]

Actually the Chinese companies pay more than most of the Big Oils for their expat workers. But, as you say, you don't want to be working for Chinese wages. Unless your a Chinese citizen...their oil patches workers are higly paid by Chinese standards...which suck by ours standards.

China is a communist gov't only internally. They are some of the most cut throat free enterprise SOB's on the planet. Go do a trade with them and let me know if you beat them at the game. They will beat almost any company any day of the week. They essentially don't factor in a "profit margin" in their deals. They also have zero envirinmental restrictions. They have no moral restrictions. It really is all about accessing the world's crude oil...not making a profit. But they don't need to. With the low labor cost you mention they can take a bbl of crude and make a bigger revenue then most other "advanced countrie". That's why they can absorb the high crude cost better than many other countries.

I still haven't been able to quantify the volume of oil they've tied up. But someday down the line we may start seeing a noticible gap between produced volumes and sales volume which will be more than the Export Land model can account for. Just a guess but I can see where one day China may have removed 10+ million bopd out of the market place.