If a windfall profits tax is approved when would we see oil price reductions?

[DrewD]

I'm curious, if Obama and his colleagues enact a windfall profits tax on the greedy oil companies, how soon after this tax is enacted will I see a noticeable decrease of fuel prices at the pump?

The high cost of gas and diesel is killing me personally on my income and I'm not against punishing those greedy oil companies to help out the little guy. How will the government ensure that the working class will get some of that money back at the pump?

Thanks in advance for your input.

 

[TT71]

You won't! The corporations will just pass the tax on down to the consumers.

 

[Rod Bearing]

Well the right would give tax breaks to the wealthy, hoping some of that would trickle down, while the left would give tax breaks to the lower income brackets, that being those who don't have 2 cars a boat and a Harley.

Neither would do much. The gap between rich and poor would only widen more.

 

[whitedog]

I just love the humor found here...

 

[aloser]

Wrong question ......

I'm curious, if Obama and his colleagues enact a windfall profits tax on the greedy oil companies, how soon after this tax is enacted will I see a noticeable decrease of fuel prices at the pump?

The high cost of gas and diesel is killing me personally on my income and I'm not against punishing those greedy oil companies to help out the little guy. How will the government ensure that the working class will get some of that money back at the pump?

Thanks in advance for your input.

You will never see a reduction in the pump price as a result of a windfall profits tax. This tax punishes the refining company for making sure the product remains available even in the face of rising costs of their raw material.

It also punishes the exploration and production companies which deliver the crude oil in the first place so you can fill your tank.

The right question is "When will I see the pump price increase as a result of a windfall profits tax".

The answer is "Immediately".

In my not so humble opinion, a windfall profits tax is a violation of the constitutional prohibition on "Bills of Attainder". These are bills (laws) which are directed specifically at a particular individual or group of persons to declare they are guilty of a crime and to punish them without benefit of a trial. In this case, the targeted group is oil companies who have been declared "guilty" of making too large of a profit. The punishment is paying more taxes than other companies engaged in other businesses who are making equally large, or larger, profits.

 

[IBWALT]

... if Obama and his colleagues enact a windfall profits tax on the greedy oil companies, how soon after this tax is enacted will I see a noticeable decrease of fuel prices at the pump?

...I'm not against punishing those greedy oil companies to help out the little guy. How will the government ensure that the working class will get some of that money back at the pump?

Drew the simple answer is NEVER. Have you never heard the joke "The truck just left the dock, the checks in the mail, I'm from the government and here to help you, ..."?

Try taxing big oil or any big corporation and see who ends up paying the tax increase. You, me and everyone else that buys their product. That's who.

Hey, we could always nationalize big oil. But after seeing what big government has done for AMTRAK I'm not sure that I would want that either.

I think that I will just chuckle along with whitedog.

Walt

 

[whitedog]

I think that I will just chuckle along with whitedog.

Walt

Neato! Usually it's "AT" rather than "WITH".

 

[Jon Linn]

Are you really sure you what the government to be telling companies how much profit that can make per year. I think I have read that the oil companies only make about 10% per year, which isn't that much. Yes, something needs to be done though.

 

[40X40]

Major oil companies in general posted profits on the order of 10% on the most recent fiscal year...

This is less than most well run fortune 500 companies.

Where are the windfall profits? It would seem they do not really exist. The more money the oil companies make, the more taxes they pay and the more operating expenses they have... Just like every other business.

This is very hard for some people to believe.

A windfall profits tax would increase the price of energy right away because it would increase the cost of doing business and not just for the oil companies but eventually for everyone as the price of energy is reflected in the price of everything man makes, transports or consumes.

Bill
PS, Do you can food? Start learning how now.

 

[Croberts]

I think that the biggest problem is the perception of many Americans (including me) is that while many Americans are hurting due to higher costs of just about everything, the oil companies are enjoying record profits. In testimony in front of Congress last month it was revealed that in the past 5 years 30% of oil company profits were used to buy back shares from stockholders, far more than was used to invest in new technologies and infrastructure.

The same tired argument that I have heard here and other forums is that MicroSoft, Google, drug companies etc.... make a higher percentage of profit. What a ridiculous argument, none of those companies/industries have the impact on every aspect of our economy the way the energy industry does. If I don't want Windows I can buy a Mac, I don't want a certain drug that the doc prescribes, I ask for something else. Oil is a monopoly and we are stuck. But a windfall profits tax would just come back to the consumer. Big Oil, it was announced today, will now be allowed to bid for the rights to get the Iraqi oil fields back to capacity. Pappy Bush, Dubya, and Dick Cheney must be celebrating tonight.

 

[OilGuy]

Oil company profits are truly hard to comprehend - but as stated above, only ~10 cents profit on every dollar of revenue now. There has got to be one heck of lot of 10 cent profit transactions going on to add up to these ridiculous numbers.

According to the API, beverage companies, drug companies, and banks make well over DOUBLE the % profit of oil companies (~20%), but the scale of their businesses pales in comparison to the energy industry (much, much, smaller)- and thus their "profits" are perceived to be lower than for oil companies.

The US tried to tax the oil companies back in the 70's - didn't work then and stations ran out of gas. What makes people think it will make things better now? Maybe that doesn't matter - getting votes is very important now

Energy is an emotional issue, not a logical one.

 

[aja8888]

I'm curious, if Obama and his colleagues enact a windfall profits tax on the greedy oil companies, how soon after this tax is enacted will I see a noticeable decrease of fuel prices at the pump?

The high cost of gas and diesel is killing me personally on my income and I'm not against punishing those greedy oil companies to help out the little guy. How will the government ensure that the working class will get some of that money back at the pump?

Thanks in advance for your input.

Punishing the oil companies? Write a letter to the .gov asking them to send you some of the money they collect from the oil companies. The prices will go up, not down.

 

[kotflb]

When looking at the price of diesel in countries where the government owns and runs the oil companies, as compared to prices we pay here in the US and the EU, I'd say let the government nationalize it.

I've heard all the naysayers comments on government waste, but that doesn't prove out when Mexico can sell diesel for $2.25/gal. After all, oil is a natural resourse.

And we could at least save the 10% profit, plus another 10% by not having to pay those hundred million dollar top management saleries, plus this would get rid of all those speculators which could save us another 10+%. All totaled, our current $4.50 fuel could fall to $3.15 overrnight. Plus, the government would be in a better position to keep OPEC prices reasonable because of volumn buying.

My flame suit is on!

 

[aja8888]

When looking at the price of diesel in countries where the government owns and runs the oil companies, as compared to prices we pay here in the US and the EU, I'd say let the government nationalize it.

I've heard all the naysayers comments on government waste, but that doesn't prove out when Mexico can sell diesel for $2.25/gal. After all, oil is a natural resourse.My flame suit is on!

FYI: our PEMEX friends in Mexico are on a collision course with disaster. Their ONE big Cantrell field is in decline and their equipment is falling apart. Couple that with their few refineries (also in bad mechanical shape) and the situation is this:

Their exports of crude to the U.S. is declining rapidly.
They are IMPORTING refined products from the U.S. (gasoline, diesel).
The gov gets 60% of its revenue from PEMEX and that is heading down.

There are articles allover the news about this impending problem. When PEMEX revenus fall off enough, then the gov will remove the sudsidy from fuel sold to the general public.

All is not well in Mexico........

 

[kotflb]

RE: aja888 " All is not well in Mexico........"

All is not well here in the US and we're still paying twice as much!

Broke down equipment can be repaired. How you gonna repair all the poor people in this country having to chose between fuel to get to work, heat to stay warm (come winter), or food to feed their families. Which would you pick? Permix can raise there fuel 10cents a gallon and repair all their equipment. Poor people don't have that option.

Ever notice how most of the countries of the world with nationalized oil (execpt Mexico) have free health care, free college education AND low priced fuel.

And furthermore, this lie about big oil only making a 10% profit is cr#p. Truth be known, their makng 10% profit at EACH STAGE OF THE GAME. For example, 1: shipping raw material. 2: receiving and storage 3: refining
4: storage and distribution 5: marketing. If profits were 10% overall, diesel would be $3.40 per gal. when the cost is $130/barrel. When compared to $30/barrel, the only cost increase should have been raw material (crude oil) and transportation.

Let me break it down a bit. Lets say I make a hoola hop for 2 bucks, I sell it to Bill (all happens to work for me) for 2.20 to inspect for defects, he sell it to Mary who puts a tag on it for 2.42, she sells it to Tom to carry to the shipping dock for 2.66, Tom sells it to Fred for 2.93. Fred give it to the van driver for 3.22, the van driver charges 3.54 plus transporation. 'I' can still 'SAY' I only made 10% profit, but my company made over 70% profit.

Big oil is skinning us alive and anyone that can see past their rose colored glasses knows it.

 

[kotflb]

FYI: our PEMEX friends in Mexico are on a collision course with disaster. Their ONE big Cantrell field is in decline and their equipment is falling apart. Couple that with their few refineries (also in bad mechanical shape) and the situation is this:

Their exports of crude to the U.S. is declining rapidly.
They are IMPORTING refined products from the U.S. (gasoline, diesel).
The gov gets 60% of its revenue from PEMEX and that is heading down.

There are articles allover the news about this impending problem. When PEMEX revenus fall off enough, then the gov will remove the sudsidy from fuel sold to the general public.

All is not well in Mexico........

QUote from MEXICAN FUEL post #148
The word subsidizing the fuel is not correct per Pemex. On the Pemex site the public records of Pemex are available. It is not a true subsidized product.
Pemex provides about 60% of Mexico's goverment's revenue. It is not subsidized but it is price controlled. Pemex still makes money for the goverment.

When a goverment spends 60% of it budget to keep fuel cheap then it is subsidized. " UN-quote"

Another good reason to nationalize crude oil. Mexico is still making money on it's domestic fuel sales.
Think about this, Mexico can ship its crude to the USA to have it refined and then ship the refined product back to Mexico and distribute it to all the retail outlets and sell diesel for $2.25/gal and still make money for the government.

And some of you want ME to beleive that BIG OIL is not skinning us alive and are only making 10% profit? Yeh, right!

 

[cptmox]

I just love the humor found here...

This thread is definitely a trip.
One poster thinks that taxing a company's profits is going to induce them to lower their prices. Another poster thinks we should model our economy after Mexico... wow, I guess that would cure the immigration crisis.

 

[Got Bearings?]

The answer is: Buy shares in Energy mutual funds. Put those profits in YOUR pocket.

 

[MrMopar]

Ah, a windfall profits tax. That is just what ANY industry in America needs.

Sarcasm aside, I don't see our flag containing a hammer and sickle. Seriously, a tax on a company solely for being successful? And don't give me any of that crap about how these companies have Americans by the nuts with a product that they need. The drug companies have products that Americans "need" in the sense that it keeps them alive and there are zero available substitute products - and yet, you don't see any politicians screaming about how they should have windfall profit taxes to take some of the money they're getting from hard working Americans.

Remember this windfall profits tax crap when the election comes along in November. Barry Obama is a democrat, and he sure speaks democrat too. "Maximize revenue" translates into "raise taxes."

 

[hutchman]

For exploration, processing, and delivery to your tank the "bad" oil companies get 4% of profit on every dollar. Out of that same dollar, the government gets 15% for doing what?.

Now where do you think the problem lies? Yea, the government really should take over the industry and make sure it is run right.

 

[Drivbiwire]

The answer is: Buy shares in Energy mutual funds. Put those profits in YOUR pocket.

Your kidding right? I want to retire not sit and watch a stagnated portfolio.

This windfall tax thing is complete bull$hit, it's all about getting the stupid people wound up because they can't comprehend the basics of economics that being the difference between profit margin and net profit AND that those profits (as low as they are) are distributed amongst the share holders and DO NOT GO TO ANY SINGLE ENTITY!

If anybody should be pointing a finger it should be at the government and their windfall profits ie taxes! They have NO risk, NO investement and simply hold out their hands asking for more and GET IT! Talk about "windfall" it's like a sure fire lottery win every time you play your numbers!

Stepping off the soap box...

DB

 

[hutchman]

The media has the average American thinking that the majority of our oil comes from the Middle East and that is just not the case.

The US has more oil than all the Arab countries combined! Most Americans get pretty pissed off when they learn this. It is pretty stupid to act like we are oil poor and run the country in the ground by not using what we have.

It is time for everyone to call/write their congressman(woman) and say enough is enough, we're not going to stand for it anymore.

 

[hutchman]

Hey, this windfall profit thing is a great idea. We should also apply it to other industries that have a gross margin 2 to 3 times that of the oil companies (Electronics, Microsoft, Dell etc.)

When you punish big money, they don't invest in the country. When the country doesn't prosper, who does that hurt???

 

[bayshorecs]

*Sits back and waits for the masses to elect Jimmy Carter back into office. And people think not having a windfall profit tax on oil is failed economic policies...*

 

[Got Bearings?]

Your kidding right? I want to retire not sit and watch a stagnated portfolio.

No, I'm not. My energy mutual funds are up more than 14% this year alone, up 35% over the last 12 months, has averaged 30%+ over the last 5 years and averaged 20% over 10 years. That doesn't seem like a stagnated portfolio, does it?

If you are near retirement, I can see that you may not want to invest in volitile industry. You want to protect what you have and minimize your risk. I'm still at least 20 years from retirement and I'll ride the waves out and laugh all the way to the bank when I cash out.

This windfall tax thing is complete bull$hit, it's all about getting the stupid people wound up because they can't comprehend the basics of economics that being the difference between profit margin and net profit AND that those profits (as low as they are) are distributed amongst the share holders and DO NOT GO TO ANY SINGLE ENTITY!

DB

I completely agree and that was part of my point. I, as a shareholder, receive part of the profits every year. Are you going to sit there and b!tch about the high prices or are you going to do something about it? And yes, the stupid people are wound up because they don't understand the laws of economics, free market and financial statements.

 

[Blinder]

The same tired argument that I have heard here and other forums is that MicroSoft, Google, drug companies etc.... make a higher percentage of profit. What a ridiculous argument, none of those companies/industries have the impact on every aspect of our economy the way the energy industry does. If I don't want Windows I can buy a Mac, I don't want a certain drug that the doc prescribes, I ask for something else. Oil is a monopoly and we are stuck. But a windfall profits tax would just come back to the consumer. Big Oil, it was announced today, will now be allowed to bid for the rights to get the Iraqi oil fields back to capacity. Pappy Bush, Dubya, and Dick Cheney must be celebrating tonight.

People LOVE to act outraged at the stranglehold "Big Oil" supposedly has on the economy and life in general, but those same people won't for one moment acknowledge the fact that America as a whole has sold its soul to oil more than eagerly and the public is for once possibly even more culpable than the government in creating (and persisting) the very dependancies and monopolies they decry (I was reading a stomach-turning article the other day by some supposedly right-wing author who's point was that driving was the American Way (tm) and must be promoted at all costs and subsidized, whereas such things as mass transit and even carpooling are tools of socialism and are "evil" enough they should be stifled... I had to wonder how quickly his head would explode if anyone were to actually manage explaining to him that reliance on a single form of transportation made accessable through government regulation and subsidy was the icky European lefty socialist situation (no offence whatsoever intended to Europeans, leftists, left-handers, and socialists)).

People also love to complain about "being stuck" with oil... last time I checked, bicycles are still for sale, corporations can be formed to found and finance transportation concerns, and "most" munincipalities are still required to provide sidewalks on city streets (though privately owned housing communities have no such requirements). We aren't "stuck" with anything, we're just collectively weak and unwilling to make the changes required to promote alternatives (both in form of transportation and in choice of fuel).

The BEST though, is when the pitchforks come out and people go on a (bush/cheney/haliburton/exxon/bp/shell/etc.) hunt. The people have demanded products and services, and have shown willingness to pay immensely for those products and services (if you build a house in the back of a gated community or along a dirt road, both with no reasonable access to any employment or services apart from automobile, it should be obvious that you are willing to spend incredible amounts of money on your transportation or else you wouldn't willingly lock in to one mode and one fuel. I understand not everyone wants to live with just a road; I'm at the end of a no-sidewalk back road with the shopping a pain to walk to and no reasonable transportation to my place of work apart from my car, and I hate it. I also have little choice here without a severe change in employment). Exactly where is the part where you should be surprised if the companies you go to for your transportation needs take full advantage of the demand for their product (you can get a Mac, a Windows PC, run *nix, or go without a computer, so MS can only charge so much for Windows and Apple can only charge so much for Macs before people decide to bite the bullet and figure out a free OS, or do without the computer. You can buy Exxon, Texaco, Chevron, Shell, etc.... or... well, you still have to buy fuel so the fuel companies can let their costs and margins grow MUCH greater before people will stop buying)? Personally I'm rather impressed we're only paying $4-$5/gal, they could gouge us for $14-$15 and probably still sell enough to see a nominal profit rise just from people who have left themselves no alternatives, at least until those people went broke.

I wonder what would happen if people starting using ONLY bottled water for everything, including their showers/laundry/etc., and then after the public water supplies were shut down in favor of hydrants filled on contract by the water bottlers because that's the last thing they were used for and people didn't want to fund them any more, how everyone would react if the price of bottled water skyrocketed within their lifetimes (because really, the decisions favoring our road-centric infrastructure and mindset came out of generations which are mostly gone) and if there would be cries of "we're stuck" and heaps of blame on "Big Water" and their monopoly that just magically appeared...

 

[nicklockard]

Nice post Blinder!

Yup, we have met the enemy...

Them is us!

We've just been too unwilling to make hard choices based on physical reality.

Pretty soon we'll have just two choices:

a. Rock
b. Hard place

To the original question:

Any "windfall tax" is just a petroleum tax on the consumers by another name. High prices are the ONLY thing that will force drivers to make better choices--which might be a good thing for our nation and future.

(snip)The high cost of gas and diesel is killing me personally on my income.(snip)

And who's fault is that? So you made a series of bad choices in living, number and sizes of cars, overbought the house, whatever, and you think big oil should be punished "

*Sigh..

 

[MrMopar]

The only SOMETHING that your politicians could do to help with the price of motor fuel would be to stop spending money like a drunken sailor. It has been the past 8 years of budget deficits that have driven the value of the dollar down record lows - and the result is that the price of oil is at record highs. It's not that oil is so expensive, it's that your money is worth so little. If congress would quit spending money on so many fiscally unsupported future programs, we might not be in the situation that we're in.

 

[mparker326]

The only SOMETHING that your politicians could do to help with the price of motor fuel would be to stop spending money like a drunken sailor. It has been the past 8 years of budget deficits that have driven the value of the dollar down record lows - and the result is that the price of oil is at record highs. It's not that oil is so expensive, it's that your money is worth so little. If congress would quit spending money on so many fiscally unsupported future programs, we might not be in the situation that we're in.

Very well said.

 

[VictrolaJazz]

This tax punishes the refining company for making sure the product remains available even in the face of rising costs of their raw material.

It's a tax prompted by envy and resentment--it was done in the 70's as everybody knows. In the 70's, it was inconceivable with $30 a barrel soon to be $75 a barrel, that we'd ever see a collapse to $10/bbl for nearly a decade. The attendant layoffs removed 50% of professionally trained personnel between 1985 and 2005 as well as scrapped millions in equipment--but that's perfectly acceptable with everyone when gasoline is cheap. Even if oil could be drilled for immediately, it'd take months to replace qualified personnel and equipment. It's inconceivable to imagine right now that there will ever be another oil price collapse, but you never know what the next week or month will bring. In the 30 years I worked in the industry, it was always boom or bust--and it was in the midst of the bust when I had to take early retirement in 1997. That's why it's ridiculous to begrudge oil companies their good fortunes now. Tremendous advances were made in gas/diesel mileages over the last 35 years if you bought the right car, but it was the public's insistance on buying millions of huge vehicles that get no better MPG than a 1976 Cadillac Fleetwood that causes so much pain--it's probably what kept Ford in business. At the Raceway, I see blue-collar folks pull in driving Expeditions, Durangos and Suburbans and leaving after pumping only $10 whenever I'm there in my Festiva. When I still had my TDI and gasoline was about $1.75, I waited for a lady to fuel a Suburban at the same pump. When she left, she had pumped in $1! I wonder what she does today.