Earlier this week, ExxonMobil recorded a second quarter profit of $10.6 BILLION amid record highs in the price of crude oil. Unfortunately, this hasn’t been the exception to the rule, as most all big oil companies are recording quarterly profits in the billions of dollars.
This doesn’t exactly seem fair when the price of gas is up 50% on the year.
With that being said, there has been a growing movement for a one time tax on big oil’s windfall profits. The purpose of levying an extra tax on these profits is to attempt to return much of the collected money to drivers, helping to offset the increase in the price of gas.
While in theory this may be a great idea, in practice this would be ridiculously dumb. Here’s why:
- If these big oil companies have found ways to pass the cost of higher oil on to the consumer, don’t you think they’ll find creative ways to recoup the hundreds of millions (or billions) they stand to lose in this windfall tax? My bet is they’ll find a way to get that money back.
- Much of the reason for the higher price in gas isn’t due to an increase in the cost of crude oil, but it’s due to the lack of refinery capacity. Big oil companies have been reluctant to increase refinery capacity (a.k.a. building additional refineries) because it takes a long time to see a return on the investment. Maybe instead of forcing the big oil companies to return money to consumers it might be a better idea to force them to use the money to increase refinery capacity.
- Here’s the greatest idea of all – MAKE BIG OIL COMPANIES TAKE THE MONEY THEY WOULD REPAY TO CONSUMERS AND MAKE THEM INVEST IT IN RESEARCH AND DEVELOPMENT OF ALTERNATIVE FUEL SOURCES.
I guess what I’m trying to get at is this windfall tax is like trying to use a band aid to treat a gunshot wound. This tax completely ignores the fact we need to use big oil’s money to find ways to reduce our dependence on oil.
{ 4 comments… read them below or add one }
The true solution is probably a $2.00 per gallon tax on gas, earmarked for research grants for new sustainable fuel sources and expenditures on expanding mass transit systems.
In theory that’s a great idea. In practice it would be economic suicide. Economic growth was up only 2.5% last quarter, while core consumer prices (which excludes energy and food) was up 2.9%.
If you threw on a $2.00 tax, taking gas to roughly $5 per gallon, you’re going to push a lot of people over the breaking point as well as kill economic growth.
The money HAS to come from the companies that are making out like bandits.
Yes, SOME of that cost needs to be passed on to the consumer, but adding 66% to the current price of gas isn’t the way to go.
Short-term economic suicide may be necessary to shake our dependence of unsustainable resources…only a large tax can significantly shake the whole of the american psyche into changing their wasteful habits…the primary alternative seems to be a world war for petroleum resources.
It’s also the only solution that prevents Big Oil from passing the cost on to the consumer. I think Big Oil would probably curb their profits in an attempt to keep gasoline below $5 in order to keep Americans on their gasoline habit.
Who would you propose gets their hands on the $2 gas? Would the Federal Government get the money and then give it out?
I don’t know who I’d trust least with that money, the Government or Big Oil!