Quote :

"Barack Obama continues the drum on a windfall-profits tax on oil companies again as a way to offset high energy prices immediately, but it could be more effective as a long-term way of dealing with the problem than a short-term fix. The windfall-profits tax has been criticized by many economists as being counterproductive. When a similar tax was imposed in the 1980s amid the Iran-Iraq war, the results weren’t exactly spectacular. The tax raised far less than projected, and an evaluation by the Congressional Research Service, a think tank that provides reports to Congress, concluded that the tax significantly reduced domestic oil output. The Obama camp insists that its proposal has taken the mistakes of the 1980s law into account, and shouldn’t have the same effects. However, in the current environment any decrease in production is likely to put pressure on prices by reducing the amount of supply in world markets. In addition, by transferring the money collected from the tax directly to consumers, it artificially boosts demand, pushing prices up further. Such a scenario could keep energy prices high, but also increase U.S. dependence on foreign oil. However, there is one potential upside to sustained higher prices and pinched domestic oil companies: more incentive to find alternative sources of energy"

http://blogs.wsj.com/economics/2008/08/01/is-windfall-profits-tax-a-green-proposal-in-disguise/


From the above-mentioned CRS report...

Quote :

"This report presents estimates of the amount of foregone oil production from 1980-1986 due to the WPT under three alternative supply price responses, reflecting three different assumptions about the price elasticity of the domestic oil supply function, a critical factor (statistic) in estimating lost oil output and increased import dependence. From 1980 to 1988, the WPT may have reduced domestic oil production anywhere from 1.2% to 8.0% (320 to 1,269 million barrels). Dependence on imported oil grew from between 3% and 13%. The tax was repealed in 1988 because (1) it was an administrative burden to the Internal Revenue Service (IRS), (2) it was a compliance burden to the oil industry, (3) due to low oil prices, the tax was generating little or no revenues in 1987 and 1988, and (4) it made the United States more dependent on foreign oil. The depressed state of the U.S. oil industry after 1986 also contributed to the repeal decision."

http://opencrs.cdt.org/document/RL33305

The very reason oil prices are as high as they are is due to a lack of supply. How does it stand to reason that the best solution is to tax the suppliers? Either Obama is completely nescient of basic economics or he is disingenuously pandering for votes.

If one were to agree with a windfall-profits tax on oil companies, then one would also agree with one on farmers. After all, the rising prices of food has surely increased farmer's profits at the expense of the consumer. And why stop there?

8/1/2008 6:05:34 PM

^ Yep. Either Obama doesn't understand economics, or he's pandering to the anti-big-business crowd.

This is just as dumb and transparent as McCain's "gas tax holiday" proposal.

8/1/2008 6:25:57 PM

NObama is and ignorant moron, and has proven it many times

8/1/2008 6:28:52 PM

^^ I agree. I was really hoping McCain would just pretend he never mentioned it

[Edited on August 1, 2008 at 6:30 PM. Reason : .]

8/1/2008 6:29:39 PM

I'll say it again:

Second Coming of Jimmy Carter

8/1/2008 7:21:35 PM

Alternative energy will offset oil costs and if oil is taxed then there's your incentive for the oil companies to actually invest more than 1% into R&D

Even if we drill the shit out of every single state in America, that's not going to make gas more than a few cents cheaper. We're not letting America drill for oil, we're letting American oil companies drill for oil. Who then sell that oil to the world market, where we buy it. Alternatives are the only way to go.

8/1/2008 9:28:14 PM

taxing profits on oil discourages oil production. Thats it. They could take the money and invest in alternative fuels, sure. But they could also invest it in stuff thats going to give them more short term gains. Like investment in foreign oil production. China is gonna need a shitload of oil and they dont give a fuck.

Hell, they could just say "fuck you guys" pack their shit in and not do anything with their profits. That would fuck us all really good.


If you want to encourage adoption of alternative energy sources you need to 1). build new nukes 2). hugely increase the tax incentives for individual persons and companies to operate using alternative sources (solar/wind/geothermal) and 3). start killing people who get in the way of alternative energy adoption (the democratic party and environmentalists).

It drives me fucking insane when people get their panties in a twist because wind turbines kill birds and look ugly.

The bottom line is altenative energy is not yet profitable or where it is profitable there are major roadblocks to adoption. If it was, we'd have solar panels on every home by now. Its like 5 or 6 years with current tax breaks to break even on a modest solar system in your home. If the fed increases subsidies, then demand will go up. Demand creates more alternative energy business which means more r&d in alternative energy. Eventually the problem is solved. Taxing companies doesn't do shit but make them hide their money or move it somewhere else.

And if you still need to get your facist on you could always change building codes to force the use of solar and/or geothermal.

8/1/2008 10:08:55 PM

windfall profit tax is in and of itself anti-capitalist and anti American. It sets a VERY dangerous precedent. Someone please tell me how its the governments place to decide when a company or industry is making too much money. I mean if it cost Starbucks .50 for a cup of coffee and they charge 5.00, who is to say that is too much profit. When does a profit or an efficiently run business become excessive. Who the hell gives the government the right to step in and take the money from a business just because they made a profit. And some idiots cheer at the class warfare rhetoric screamed by Obama our Lord and savior when it is directed at big oil or wal mart, but don't be surprised when the government someday tries to do the same thing to small business owners

8/1/2008 10:41:33 PM

Quote :

"I mean if it cost Starbucks .50 for a cup of coffee and they charge 5.00, who is to say that is too much profit. When does a profit or an efficiently run business become excessive."

i'm not defending the windfall profit taxes, but gasoline is and has always been somewhat of a special case here. Coffee is undoubtedly a discretionary product with almost completely elastic demand (of course, Starbucks uses their brand name to move the price point up).

We have shown in the past couple months that the demand for gas is somewhat elastic, as people are cutting back on their driving. But overall, the demand for gasoline is high and will always remain high, no matter what the price is, because a good portion of our entire economy literally runs on gas and oil. When (if) gas/oil profits are "too high", then the effect goes far beyond just paying more at the pump - food prices, shipping prices, retail prices, nearly everything is tied to the price of gas.

Again, not an argument for windfall taxes, but I don't think you can deny that uncompetitive or unusually high profits for oil companies, in particular, can have harmful, or at least widespread impacts throughout the economy.

8/1/2008 10:54:33 PM

Okay but see, reinvesting money back into the company isn't a profit, so a windfall tax creates incentives for the CEOs to spend that money on R&D instead of just buying more shares of their own stocks. It also helps keep the price of gas at a level where alternatives can be cost-effective and people will be willing to make the switch. The $4/gal level seems to be where people start looking for other options and the poor aren't getting screwed too bad. And I'm all for subsidizing wind and solar but that money's got to come from somewhere.

I mean maybe it's not the best plan, I'm not sure what is, but the big argument is that we'll have less domestic oil production and buy more foreign oil. But domestic oil doesn't actually do us much good and alternatives are the only way off of foreign oil. That's the way it has to go even if we just blew up Florida and replaced it with a massive Florida-sized oil platform.

Also Al Gore has been talking wind and solar for years and years so how are the Democrats standing in the way of alternative energy

8/1/2008 11:40:56 PM

For the sake of argument, let's grant the premise that "excessive profits" can be both well-characterized and have harmful effects upon society.

The larger issue here is that even assuming these to be the case, a windfall profits tax has historically had the opposite of the intended effect upon oil prices. As others have already pointed out, it provides a negative incentive for future oil supply development, namely by sharply reducing the marginal return on new investment.

Meanwhile, the assumption that said profits will be channeled into alternative energy sources is hopelessly naive - it assumes that these investments will actually be made (rather than, again, as other have pointed out, simply channeling investment into developing foreign oil markets, which are also clamoring for oil), which has historically not been the case.

In short - we've been down this road before, and a windfall profits tax is the least effective means of solving it - it in fact is simply counter-productive. About the only worse thing that could be tried - which hasn't been put back upon the table yet, probably because it would be laughed out of the room - are price caps. Which means long lines and rationing, just like the 70's again - whoopee!

8/1/2008 11:43:36 PM

Welp, I guess by the time we do actually make a concerted effort to shift to alternative energies it will pretty much be too late and we'll all be dead anyway



way cool

8/1/2008 11:49:13 PM

Look, if you want to do something about alternative energy, there are better ways to do it. Like removing implicit and explicit subsidies to the energy industry to level the playing field. The problem is, that also means that alternative energy doesn't get any special favors, which doesn't seem to be the way people want to play these days.

8/2/2008 12:07:42 AM

Windfall profit taxes were already tried..cough cough Carter couch cough......and that did nothing to solve the problem. It only led to more inflation. As for the alleged profits, the actual profit Margin is quite low compared to other industries.

8/2/2008 12:40:27 AM

The gov't makes 40 cents on every dollar of gas... now that's a windfall profit!

8/2/2008 1:35:35 AM

yeah im all for lowering that tax

8/2/2008 2:38:58 AM

40 cents/gal for now. They're already talking about raising the tax in order to offset lower gas sales.

8/2/2008 7:50:50 AM

ok guys, but obama is going to take money from the gas companies and give it directly to you. Wow, sounds like a promising long term energy plan right there. This is actually much worse than the gas tax holiday idea, which was shit. However, this will help buy some ignorant votes.

What is the old saying, if you want LESS of something tax it. How does that figure into your supply and demand equations fellas?

Actionpants, the dems are not even voting for wind or solar. They arent voting at all, they want you to conserve and keep using speculation at the root of all evil. SO thier plan is to put some air in your tires, tax people for investing, tax companies for producing oil, and drill on land that thier isnt oil in. Brillant.

Did you hear what pelosi said.. "Enjoy your vacations, you deserve it." WTF.

8/2/2008 9:11:09 AM

Nancy Pelosi sucks and nobody likes her fyi

8/2/2008 11:21:25 AM

Quote :

"Nancy Pelosi sucks and nobody likes her fyi"

how can you say that when her book is selling so many copies

8/2/2008 11:42:31 AM

Quote :

" What is the old saying, if you want LESS of something tax it. "

From what I understand, the gas taxes are not enacted if the company uses it to fund renewables or reinvest it in additional production. Exxon Mobil seems to be more than happy to keep the supplies tight and spend a majority of their windfalls on buying back shares to inflate their stock price. I think a windfall profits tax is the only way to force them to invest in production, lest they cede their ill gotten gains to the people.

8/2/2008 12:40:28 PM

ill gotten gains? Listen to yourself.

8/2/2008 1:05:03 PM

^^ There are several issues with this. Firstly, it sends a very disturbing message that the government has a right to dictate how companies spend their money. This would open a pandoras box for other industries to be regulated as well. At a time when we desperately need additional foreign direct investment, it would be a travesty to announce to the world that if they choose to invest in the US, their spending and profits must be within the government's acceptable limits. This is an egregious abuse of government power.

Secondly, who decides what the acceptable limits are to R&D spending and profits? Do you really trust congress that well to have them decide for energy companies how much they need to spend on R&D and how much they should make each year?

Thirdly, diverting funds away from exploration and development will decrease the supply of oil, thereby further increasing prices and creating an even larger burden for those at the bottom of the income spectrum. It also has the ill effect of discouraging new entrants into the market place. Who would want to spend millions of dollars to find new oil if the return on investment is capped at an ambiguous amount?


[Edited on August 2, 2008 at 1:12 PM. Reason : .]

8/2/2008 1:07:13 PM

Quote :

"ill gotten gains? Listen to yourself."

Why? Analysts say prices aren't tied to fundamentals. We have a President oilman and a Halliburton exec who conferred an energy task force of oil companies without even including the Secretary of Energy. The oil companies donate millions to politicians to pass policies and tax structures favorable to them. Commodities speculators have driven up the price, creating artificial demand for contracts they will never fill. Theres no way that these mega profits can be viewed as being legitimately earned.

8/2/2008 2:02:23 PM

Quote :

"Analysts say prices aren't tied to fundamentals."

This is certainly not the consensus.

Quote :

"Commodities speculators have driven up the price, creating artificial demand for contracts they will never fill."

If that were the case, we would see vast growth in inventories, something that has yet to happen.

http://dss.ucsd.edu/~jhamilto/understand_oil.pdf

8/2/2008 2:19:53 PM

these are oil companies not alternative fuel companies right?

8/2/2008 3:38:10 PM

Nice posts hunt.

sky, dont confuse them.

8/2/2008 5:14:35 PM

Things that really bother me in America:

1) College kids and recent grads have a better grasp of economics than congress and political leaders.

2) ~15% of the Democratic Party can't see through a pandering scoundrel like John Edwards and will vote for him

3) ~50% of the country can't see through a coattail riding, intellectually hollow, money hungry candidate like George Bush and will vote for him.

4) At a time when our economy is at a complete crossroads 50%+ are considering voting for a guy like Barack Obama who has indicated he intends to push the economy in the wrong direction at all costs.



I'm really not sure that we should continue our current voting system. Perhaps only intellectuals should be allowed to run for President. Perhaps people with social agendas should no longer be allowed to vote. Maybe we could enact a Jim Crow like test and if you don't pass it you can't vote. The questions should include "would you support a gas tax holiday", "would you support an increase in taxes", "do you think corporations should be taxed heavier", etc and if you say yes to any of them you lose voting rights.

8/3/2008 1:49:50 PM

^your voting rights should be suspended. if youre smart enough to realize the gas tax holiday is a bad idea, you should be smart enough to realize that an increase in the gas tax would be beneficial. its nearly a consensus among economists. some basics:

Raising the gas tax will:
-lower oil dependence on our terms because of...
-actually lower total driving
-lower accidents, congestion, local air pollution
-climate change to some degree
-raise money for the govt
-more economic independence due to lowered gas consumption
-also, we will have more stability as were not as tied to these volatile countries (venez, middle east)

Increasing CAFE standards will:
-barely lower driving as the increased mpg is offset by increased driving
-more driving leads to....
-more accidents, congestion and local air pollution
-raise no money for the govt, makes cars cost more due to compliance costs in car manufacturing
-more expensive cars
-they lead to the SUV craze in part, it created a 'truck' that get skip by normal standards


When you put a tax on a company, they restrict production and raise the price. It forces them to act as if their production cost more, thus they lower output. Which in the oil game, is bad for us because they would raise the price. So lets do it on our terms and actually raise the tax as painful as it may be.

The market will adapt. Gas is at 4/gallon and minis are pretty much sold out for the rest of the year. SUV production has been cut at factories and the prius has taken its place at some plants. This is all happening way faster than anything CAFE has ever done.

Oil companies operate with like a 10% profit margin. Its not really that huge. They just happen to have such enormous revenues and costs, so it seems bigger. CBS made more than Exxon (in profit percent) in the first quarter of the year. So change in percent (which matter) arent that big. If they lose 3% of revenue, its a huge number. A 10% reduction will put them on the margin and they will react economically accordingly.

It also makes sense that prices rise over time because when we first drill for oil, we pick the lowest hanging apple. As time goes on, we run out of total oil. Also, were operating on oil that is much more costly to get to.

Im a fan of (in theory) hybrids. Theyre not really economically viable yet. It doesnt matter what the cutting edge technology is. What matters is what can be economically feasible for the average citizen. It has to be cheap and easy so that we can adopt it without huge subsidies from the govt. The prius is still losing money for Toyota! The technology may be 'here' but its not cheap enough for it to be completely viable. For most hybrids (cars) the cost of the upgrade in technology offsets the cost of gas you save. Very few hybrids justify their savings in gas (eg escape hybrid).

Speculation is such crap. For every speculator that is above the 'actual' price, there is a speculator below the price. They provide a bridge from the present to the future. They reduce price volatility. They also lower prices just as easy as raising prices. Theyre not out to raise prices. They do the best with their knowledge to pick the right price, thats how they make money. They banned the speculation of onions a while back because a similar blame was put on onion speculator -- and what has happened to their price since then? It has become more volatile.

Sorry for the huge post but this is kind of my thing

8/3/2008 4:23:18 PM

^ pure genius. put another tax on gas and that will lower the price.

8/3/2008 5:25:27 PM

Where exactly did he say that raising taxes would lower the price?

8/3/2008 5:36:22 PM

so, then, he would just love to make it even harder for people to afford gas, then, right? How compassionate!

BTW, for those saying "who is the government to say how much profit a company should make," keep in mind that the government already kind of decides how much income is "enough" for a person to make. I'm just sayin...

[Edited on August 3, 2008 at 6:04 PM. Reason : ]

8/3/2008 6:03:37 PM

Quote :

"you should be smart enough to realize that an increase in the gas tax would be beneficial. its nearly a consensus among economists"

So, there is a consensus amongst economists to raise the gas tax? O'Rly? Any sort of proof for that? Cause that is the first I have heard of it.

8/3/2008 6:34:13 PM

So wait...

You are advocating for less consumer purchasing power and artificial inflation.

And the proceeds go to the most inefficiently run business in the country (the gov't of course with apologies to GM and Ford who were in the running)


What were the benefits again? Oh yeah we'd drive less. Retailers would be less crowded, certain business opportunities would become unprofitable, tourism would decline, and financial markets would become unnerved over inflation.

That is really sound policy.

I can't take econ lessons from a government shill.

8/3/2008 7:01:50 PM

n00bs

Everyone wants the US to move towards alternative energy and to use less oil. The absolute quickest way to do this is for the market to adapt. How do markets adapt? Money. This would give us a permanent financial incentive to reduce consumption and find alternative sources. Its called a dynamic incentive.

I never said it would lower the cost of gas. The point is to raise the cost. So that we consume less oil, are more independent, drive less, pollute less and contribute less to climate change --- isnt this the big deal? The liberals are always screaming about oil dependence, alt sources and climate change. This is the fastest way to achieve those goals. It might be painful but if were really gunning for what we say we are, this is the way to do it.

The 'right' amount of tax. Pigouvian taxes (taxes on things with negative externalities, like gas) are made to help reflect the true cost of the product. The markets Supply is based of the producers cost. We have our demand, the intersection is the price and quantity. However, there are social costs to consuming gas (pollution, climate change, congestion, etc) so the cost is greater. So we tax the amount of damage which is calculated by measuring how much were willing to pay to lower those things. The only articles Ive read on actual numbers put the correct gas tax at 1 dollar. It is current .41 national tax, .48 total with other NC taxes. So the ideal tax is above our current tax, below western Europes.

The revenue from the gas tax could be used towards helping those have a hard time with the price increase. Which has been widely proposed by those supporting it, as its a regressive tax (gas takes up more of the poors income/budget).

Ever heard of Krugman or Mankiw? Pigou Club? You know, like the two biggest economists alive? One is a huge democrat, one is a huge libertarian (often affiliated with the republicans. They both support the tax. If you ever read anything economic (wsj, the economist, academic literature) you will see people think the increased tax is the fastest and most effective way to reduce oil dependence, quicken alt sources prevalence, and help the environment.

Artificial inflation. Uhm, no. I cant argue a point that doesnt make much sense. The price is likely to rise in the future. So why not do it on our terms, move towards other energy sources and make the US a cleaner place?

Econ lessons from a govt shill? Uhm, the gas tax is one of the hottest econ topics and almost all actual economists support. Its what Im in grad school for.

Basically, people dont want to pay the tax. Yes, it would be costly. But, it solves the issues that people gripe about. They are pushing for an additional 50 cents a gallon. That would lead us to the ideal point where the cost of gasoline at the pump equals the social cost of the good.

I dont need 'its not fair' or 'fucking oil you faggots, its bush's fault' from anyone. Please.

Since tourism is being crippled right now? Ha. Tourism is just fine at the moment.

The point of the gas tax is not to get cheap gas. Thats never going to happen. Ever. What we need is an alternative source that is economically viable. We need to become less dependent on oil. We need more fuel efficient cars. The fastest way to achieve those is to increase the gas tax.

heres an article from Greg Mankiw, Harvard economist, has worked in the whitehouse, writes all the principles of economics texts: http://gregmankiw.blogspot.com/2006/10/pigou-club-manifesto.html

*I realize this would never fly because people are extremely sensitive to price increases. Though people also say we need to do everything we can to reduce oil dependence, increase alt sources and make the environment cleaner...and this is a sure fire, direct way to do it.

[Edited on August 3, 2008 at 7:22 PM. Reason : tits]

8/3/2008 7:20:04 PM

^ Yes. Of course. Also, there are different ways to cut the cake. Listen to the gloom & doom people if you want to know the best ways.

http://www.youtube.com/watch?v=rkzETN8qfzw

A floor on the price of oil would accomplish the things you're talking about. For people to develop alternatives, they need to know that x years down the road the price must be y dollars higher, or else your project won't be economical.

A tax simply makes it more attractive to develop alternatives and drill more. Another thing that would really jump start it would be to say that the price will be at least a certain value some time down the road.

Quote :

"so, then, he would just love to make it even harder for people to afford gas, then, right? How compassionate! BTW, for those saying "who is the government to say how much profit a company should make," keep in mind that the government already kind of decides how much income is "enough" for a person to make. I'm just sayin..."

Add to that:
The price of Exxon right now already reflects that fact that they might be ultra-taxed in the future. That P/E ratio is looks niiiiiice for a world where that risk doesn't exist.

[Edited on August 3, 2008 at 7:36 PM. Reason : ]

8/3/2008 7:32:43 PM

^Theres no guarantee though. Were never going to see the end of oil. It will stop being used when its supply has dwindled enough that the price has risen too far and other technologies have proved to be most cost effective.

They likely will be taxed heavily in the future. Whether theyre directly taxed off their profits or a gas tax is added. Our consumption will reflect a price change and they need to be ready for that.

Theyre a business just like any other (sort of). Theyre out to make a profit, and as a percentage of sales, theyre actually quite similar to other business who are not being crucified at the stake (tv stations, apple, finance).

8/3/2008 7:41:56 PM

I've said before that the $4/gal mark is where people start giving a shit about finding alternative energy sources without screwing the poor too much. It sucks but gas needs to stay in that zone as long as it takes for electric cars and nuclear/renewables to be viable.

8/3/2008 9:20:44 PM

All I have to say is ew.

Let's artificially inflate the price of gas so that other sources become viable.

That is like saying let's tax the shit out of cable tv so that network tv becomes more palatable.

Or lets increase property taxes to the point where camping in tents looks attractive.


Essentially this is like a tariff. Who actually believes this money would be spent responsibly by our government?

What about the changes this would cause? Clearly, urban areas would see an increase in home values while rural areas value would decrease. How is that fair to existing home/land owners?

I don't think the government needs to be in the business of manipulating markets.

How about we just buy $4 gas until gas becomes so expensive that alternative energy is cost effective. Cant we wait until then to make the shift?

8/3/2008 9:42:55 PM

Its not artificially inflating the price of gas! Youre missing the point on social optimums. The market chooses a price and quantity given consumer demand and the supply curve of the industry. That supply is too generous (too far shifted right) because there are social costs to gasoline -- ie negative externalities. So, to account for these, so that pollution is accounted for, we need the firms to act as if they were experiencing the true costs of their product. We do this by taxing companies.



As your can see, the market outcome (pink, 'mkt') has a lower p and higher q than we want based on the true societal cost. When natural resources are left for the taking, they are overused and the true costs and never accounted for. In the situations we tax the act so that we have the socially optimal outcome (red, stars). This is the point where the price reflects the demand and the marginal cost of damage that unit incurs.

This is somewhat basic environmental economics. Youre the reason it will never fly. People dismiss this and say 'this is america, i want walmart gas'. Thats not going to fly, the current level of taxation on gasoline does not make up for the damage it does. Which is why we tax it so that real cost and price paid match up, ie socially optimal.

So, in effect, its not like a TV in the least because TVs supply curve is the TVs supply curve. It has no negative environmental damage which we need to account for when analyzing it. Its like saying 'lets tax glasses so that people buy contacts'. Thats just dumb. Glasses do nothing wrong, no added social cost. So no need to raise the tax. So comparing it to a TV really just shows that youre not aware of the total cost, discounting your own argument.

Also, the whole 'pushes us towards other alternative options' is just an added bonus. Its not the reason to do it. Its just the reason that people might go for

[Edited on August 3, 2008 at 11:01 PM. Reason : ]

8/3/2008 11:01:11 PM

I'm pretty hardcore for free markets, and I agree with Colemania.

To quote myself from a month ago:

Quote :

" There is nothing healthy, or inevitable, about the current run-up of energy prices which threatens to send us into a very nasty recession. If we had previously taxed oil to reflect on the true environmental and energy security costs of the fuel, alternative energy sources and economical mass-transportation systems would be much farther along. Unfortunately, responsible planning is not a political winner in this country. As it is, we are one of the least-prepared first world nation for this current energy crisis, and one of the most vulnerable to an economic downturn from it. I don't advocate a windfall profits tax to fund alternative energy. Nor do I think we should have a hodge-podge of subsidies and grants funding the pet energy projects of powerful politicians. The free market is almost always superior at allocating resources than any bureaucracy. However, the cheap gasoline that we enjoyed for so long did not reflect the true costs of the fuel, and it certainly did not help us in planning for the future."

Quote :

"The price of gasoline does not and has not reflected the true externalities of the fuel. In this particular industry there is a dissonance between marginal and social costs that is simply not solved by the free market. The industry cannot internalize the security risks and pollution costs inherent with the use of the fuel. Therefore it is the government's duty to create a more efficient market by regulating consumption or taxing the fuel source proportional to it's external costs. The market will come through and create alternatives as prices rise; there is no need for the government to dabble in alternative energy R&D."

[Edited on August 4, 2008 at 12:37 AM. Reason : 2]

8/4/2008 12:35:19 AM

Dude I majored in econ I understand the argument about externalities.

The point is I don't care that much about the pollution issue. It's greatly exaggerated in my opinion in terms of gasoline consumption by ordinary Americans.

I care about our economy operating as efficiently as possible so that I don't have to live frugally.

When the supply of oil fails to meet the current demand the price will continue elevating. At the point where switching to alternative fuels makes economic sense I will be all for it.

Until then there are much bigger issues the gov't should be working to fix. Like balancing the budget, exit strategy from Iraq, fixing the broken education system, and raising minumum wage.








Just kidding about that last one.

8/4/2008 12:51:52 AM

Pollution is just one externality. You are ignoring the energy security costs that we pay through the use of our military to ensure that oil flows safely in the Persian Gulf, estimated at $50 to $100 billion a year.

http://www.icta.org/doc/RPG%20security%20update.pdf

If you want the market to operate as efficiently as possible, then you have to do something so that the price of gasoline reflects it's true costs. The best way to do this is by taxing it to reflect these exernalities.


[Edited on August 4, 2008 at 1:04 AM. Reason : 2]

8/4/2008 1:01:58 AM

alright, dude

Well if you want things to be as efficient as possible (despite the fact that efficiency has nothing to do with the gas tax), why not remove the tax we have now?

There are places for more taxes and there are places for less taxes. I believe gas is one where more taxes should be. The corporate tax is where there should be less. THat would lead to better business. Not an additional six bucks for a full tank of gas like my current car (twice a month ~ 150 bucks a year, it wont kill you).



No one ever mentioned anything about priorities. This whole thread is about taxes profits on oil companies. Hence the oil and tax discussion.

The gas tax is pretty low on my asap list. I just think its a good idea. Theres a ton of things that Id like to see though. Doesnt mean any of them will happen or that theyre unimportant.

I was about to vent on the minimum wage, glad i made it down to the final line before teeing off.

Quote :

"When the supply of oil fails to meet the current demand the price will continue elevating. "

Though Im not sure what you really mean here. Price rises due to some combination of world demand, total supply, ready supply, and the dollar. I dont think that waiting until gas in unaffordable is the best idea. Because it will actually be unaffordable if we just wait until something else is viable. A prius (which Toyota loses money on) is pretty unaffordable for some of america. And it has gas driving the wheels. The Volt (which has electricity driving the wheels, fairly big step) costs about 40k to make without subsidies. Thats not really viable and still needs gas. My only argument is that we cant wait for things to happen and then figure out what to do. We need to get working on them today so that we'll have something economically viable for when gas gets too pricey or, even better, something becomes cheaper

8/4/2008 1:06:40 AM

I don't think anyone really disputes that general principle about the gas tax. Tax it, and people will use less of it.

Quote :

"When the supply of oil fails to meet the current demand the price will continue elevating."

This just sounds like nothing more than an economic cycle. Picture a sin curve. There's no real doom-and-gloom awaiting during the next spurt up, though it'll leave $150 per barrel in the dust. Just more "pain at the pump". It'll fall again, but the net trend is obviously up.

8/4/2008 10:34:22 AM

I think it pretty much comes down to punishing people that use oil, and punishing people that produce oil. You have to realize, democrats like Pelosi are "trying to save the planet." They really believe that by making it so people don't use gas, they'll stop global warming. It's all connected. I think Obama is too smart to think that a windfall profits tax would do anything except hurt the average consumer.

8/4/2008 1:00:54 PM

Colemania's argument seems to be that the windfall profits tax essentially acts as a tax on oil itself.

I have to admit I had not thought about it that way and I'll have to take some time to think about the extent to which one could be substituted for the other.

In terms of its effects on the market a windfall profits tax is a tax on risk. When you take big risks you make big profits. It would seem that the major risk in oil and gas is discovery. If thats the sole effect my guess is that a windfall profits tax is similiar to a Pigouvian tax but it also seizes the profits of past investments.

In general seizing past profits is a bad idea because of its effect on risk taking but since that's the mechanism we want maybe its not all that bad.

[Edited on August 4, 2008 at 1:27 PM. Reason : .]

8/4/2008 1:27:14 PM

I'm pretty sure that Colemania is arguing for a higher gas tax, not a windfall profits tax.

8/4/2008 1:39:14 PM

^^ I think that's a valid way to look at it. On that idea, I'm not sure it's so smart to tax risk when we need more of a diminishing resource located in progressively more difficult places to drill.

I don't really think a simple gas tax would decrease incentive to drill. Even with conversions to electric cars and rapidly falling domestic demand the price could stay at current levels as OPEC produces less oil and uses more oil. Add another one or two economic giants to the world from the ranks of developing nations, and the oil companies could care less that US demand waned a good bit.

8/4/2008 2:36:39 PM

^^Yeah, I think the windfall profits tax is dumb, but I never really got into that. You tax the producers, they produce less and charge more. Im arguing that we do that on our own terms and let the revenue come to us, instead of them. That is, if youre trying to reduce oil dependence, etc all those things.

I think it would be the best case scenario but that doesnt mean Ill like it. Sometimes you just need to do things knowing that the outcome will be the best.

8/4/2008 4:41:30 PM