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Posted at 10:46pm on May 5, 2008 Hillary Clinton's Dangerous Energy Policy Ideas

By Vladimir

I caught a brief snippet of Hillary Clinton's recent interview with populist windbag Bill O'Reilly, and my blood began to boil. In the interview, Hillary staked out some energy policy positions that are not only wrongheaded, but dangerous.

1. The Windfall Profits Tax. Jimmy Carter's WPT had the veneer of legitimacy as it came along at a time when oil prices were transitioning out from under government controls. Now the rationale is much more straightforward: the oil companies make too much money. Note that the last time it was tried, the WPT was counterproductive: it reduced domestic production while increasing dependence on imports, exactly opposite what we should be doing now.

"And there is no basis for them to have these huge profits. They're not inventing anything new." The domestic oil and gas industry suffered from essentially flat prices from 1984 to 2004. During that time period total industry employment fell by half. Companies and fortunes were destroyed, and no one from the government rushed forward to make good their losses. Today's industry survivors have been through tough times, and that survival is attributable to their intelligent, innovative use of technology.

I defy anyone to name an industry with a better record for adapting and implementing advanced technology than the oil and gas exploration and production sectors. We routinely use technology today in ways that were mere daydreaming fantasy 30 years ago when I graduated college. Much of the demand for advanced supercomputers is for seismic processing. Horizontal drilling is now commonplace. One thousand feet of water was once an unimaginable threshhold; now wells are drilled in 10,000 feet of water, and there is production in 6,000 feet. There have been thousands of other new techniques and technologies, some incremental, but some groundbreaking in scope.

When you say we haven't invented anything, Senator Clinton, you lie. You lie.

2. "I would also change the law so that citizens and businesses could file anti-trust actions. We're going to begin to hold them accountable." Well, as good Democrats, we all know that lawyers are the answer to every single one of the world's problems.

Note that this remark is juxtaposed with the Senator's remarks about OPEC, but in that context they would make no sense. OPEC members are sovereign states. If there are trade sanctions to be taken against OPEC, that would be the job of the FTC or the State Department, not an anti-trust matter for private American citizens to pursue.

No, Senator Clinton must have been talking about turning the legal beagles out on American oil companies. Here's problem with that plan: the only phase of the industry that could possibly be considered to be concentrated in the hands of just a few companies is refining, a segment with historically low returns. Even now, the big refiners are not all that profitable because they all have to pay the world price for the barrels that enter their refineries, and none of them are self-sufficient in crude. They have to supplement their own production with barrels they buy from the smaller, non-integrated independent producers (who, by the way, drill 90% of domestic wells), and from foreign imports.

So what good would it do to break up the refiners? Exactly zero. But the trial lawyers would have a field day, and the oil companies would concentrate on legal defense instead of finding new supplies.

Posted in 2008 | Energy Policy | Windfall Profits Tax — Comments (24) / Email this page » / Read More »

Posted at 2:06am on May 3, 2008 A Specter Is Haunting Tax Policy . . .

By Pejman Yousefzadeh

Barack Obama has come out against the "gas tax holiday" that is being pushed by Senators McCain and Clinton. Obama's reasoning is defensible; he believes that a temporary lowering of gas prices will increase demand--especially now that we are heading into the peak summer driving period--thus eventually further reducing supply and causing the price to spike. At the end of the day, Obama argues that a gas tax holiday is hardly a short term solution to the problem of high gas prices, let alone a long term solution.

Let's grant that for a moment. What then to make of this?

Democratic presidential candidate Barack Obama's proposal for a windfall profits tax on oil companies could cost $15 billion a year at last year's profit levels, a campaign adviser said.

The plan would target profit from the biggest oil companies by taxing each barrel of oil costing more than $80, according to a fact sheet on the proposal. The tax would help pay for a $1,000 tax cut for working families, an expansion of the earned- income tax credit and assistance for people who can't afford their energy bills.

``The profits right now are so remarkable that one could trim them 10 percent or so, which would turn out to be somewhere in the $15 billion range,'' said Jason Grumet, an adviser to the Obama campaign.

This plan is ridiculous. As I have pointed out before--in incorporating the arguments of others--oil companies don't make as large of a profit as people think and they must contend with an exceedingly volatile pricing structure. What's more; the tax will be self-defeating. Surely, Obama must know that oil companies will only try to find ways to pass the costs of a windfall profits tax on to the consumer. With their lower-than-thought profit margins, this almost becomes a necessity.

Obama has gotten a lot of praise regarding his stance on gas tax and the proposed gas tax holiday. But where is the recognition that his plan for a windfall profits tax will in fact make things a lot worse for people when they have to purchase gas?

Posted in Barack Obama | Economy | Gas Prices | Windfall Profits Tax — Comments (16)/ Email this page » / Read More »

Posted at 4:34pm on Apr. 13, 2008 You're So Right, Obama! Windfall Profits Should Be Taxed ...

By Vladimir

..and taxed heavily.

After all, past a certain point, success is just ... unseemly ... un-American, even.

In our capitalist system (for the time being, comrade), an investor may be entitled to a certain rate of return, but shouldn't it be enough be enough to double, or even triple your money? I think so, and I'm sure you agree.

Any more than that is pure greed. They're stealing from all of us.

And since the ill-gotten gains cannot be easily returned to the victims, who better than the government to collect the spoils, and to decide how to spend them. Certainly, they will go for the collective good.

And the greedy capitalist pigs can hardly object! They are benefiting disproportionately because of their position in a highly profitable, indispensable industry that has erected terrific barriers to entry. Surely, they will be satisfied with the portion the government decides to let them keep, and they will keep cranking out the product for mass consumption, just because that's what they do.

You with me so far? I thought so. Follow me.
...more...

Posted in Energy | Windfall Profits Tax — Comments (31) / Email this page » / Read More »