NationStates Jolt Archive

Emphasis mine

WASHINGTON — Senate Republicans blocked a proposal Tuesday to tax the windfall profits of the largest oil companies, despite pleas by Democratic leaders to use the measure to address America's anger over $4 a gallon gasoline.

The Democratic energy package would have imposed a tax on any "unreasonable" profits of the five largest U.S. oil companies and given the federal government more power to address oil market speculation that the bill's supporters argue has added to the crude oil price surge.

"Americans are furious about what's going on," declared Sen. Byron Dorgan, D-N.D., and want Congress to do something about oil company profits and "an orgy of speculation" on oil markets.

But Republicans argued the Democratic proposal focusing on new oil industry taxes is not the answer to the country's energy problems.

"The American people are clamoring for relief at the pump," said Sen. Pete Domenici, R-N.M., but if taxes are increased on the oil companies "they will get exactly what they don't want. The bill will raise taxes, increase imports."

The Democrats failed, 51-43, to get the 60 votes needed to overcome a GOP filibuster and bring the energy package up for consideration.

Separately, Democrats also failed to get Republican support for a proposal to extend tax breaks for wind, solar and other alternative energy development, and for the promotion of energy efficiency and conservation. The tax breaks have either expired or are scheduled to end this year.

The tax provisions were included in a broader $50 billion tax measure blocked by a GOP filibuster threat. A vote to take up the measure was 50-44, short of the 60 votes needed.

The windfall profits bill would have imposed a 25 percent tax on profits over what would be determined "reasonable" when compared to profits several years ago. The oil companies could have avoided the tax if they invested the money in alternative energy projects or refinery expansion. It also would have rescinded oil company tax breaks _ worth $17 billion over the next 10 years _ with the revenue to be used for tax incentives to producers of wind, solar and other alternative energy sources as well as for energy conservation.

The legislation also would:

_Require traders to put up more collateral in the energy futures markets and open the way for federal regulation of traders who are based in the United States but use foreign trading platforms. The measures are designed to reduce market speculation.

_Make oil and gas price gouging a federal crime, with stiff penalties of up to $5 million during a presidentially declared energy emergency.

_Authorize the Justice Department to bring charges of price fixing against countries that belong to the OPEC oil cartel.

Republican leader Mitch McConnell of Kentucky has acknowledged that Americans are hurting from the high energy costs but strongly opposes the Democrats' response and has ridiculed those who "think we can tax our way out of this problem."

"Republicans by and large believe that the solution to this problem, in part, is to increase domestic production," McConnell said.

A GOP energy plan, rejected by the Senate last month, calls for opening a coastal strip of the Arctic National Wildlife Refuge in Alaska to oil development and to allow states to opt out of the national moratorium that has been in effect for a quarter century against oil and gas drilling in more than 80 percent of the country's coastal waters.


http://www.huffingtonpost.com/2008/06/10/republicans-block-extra-t_n_106282.html

How exactly is it that increased taxes on oil companies are a terrible thing that must be stopped at all costs, but increased taxes on renewable energy are perfectly acceptable? How do the same arguments fail to apply to renewable energy sources, especially when the same Republicans who voted against the measure themselves state that their own proposals will not entirely alleviate the problem?

I'm also tired of the Dems in the Senate caving every time the Republicans threaten a fillibuster. Try to pass the measure anyways, and let the Republicans obstruct it if they feel like it...given popular opinion these days, I think those Senate Republicans would quickly change their tune if they had to publically proclaim that they are for higher taxes on renewable energy but not for big oil.

Your thoughts??

OP title: Yup.
I'll read the actual article later :D

I'll read the actual article later :D

As long as the worship continues, feel free to take your time. ;)

On the first count, they are in all likelihood right. I don't see why oil companies couldn't simply compensate the extra tax by slapping their own surcharges on top. It would basically be a vicious cycle: oil companies face higher costs, so they charge more, so they earn more, so they get these extra taxes, so they face higher costs...

If demand was elastic enough to stop them from doing that, it would also be elastic enough to prevent them from passing higher production costs on to consumers. A much better idea would be to simply increase the rebates they could get for investment projects aimed at expanding capacity in one way or another. Granted, it might mean that oil companies could pay even less taxes (gasp!) and that there won't be a few extra billion dollars in the purse to be spent on vote-buying (gasp!²), but at least it wouldn't be an incentive for even higher prices at the pump. And in the long run, it might do something to alleviate the fact that demand has been rising more quickly than supply in recent times.

The Senate Republicans are of course wrong about the renewable energy tax break. I have no idea why they'd want to block it, but I suppose it can all be explained with "they're politicians".

As long as the worship continues, feel free to take your time. ;)Actually, the same thought crossed mine own "mind" earlier when i'd read a different source of the same situation. :(
Oh well. No surprises, which pretty much sums up my first response anyway.
*worships*

The Senate Republicans are of course wrong about the renewable energy tax break. I have no idea why they'd want to block it, but I suppose it can all be explained with "they're politicians".It can also be summed up with, "they're dickheads, typically on the take and nestled firmly in dank Pluto pocket".

It can also be summed up with, "they're dickheads, typically on the take and nestled firmly in dank Pluto pocket".
You'd really have to wonder though what lobby group wants to eliminate tax breaks for renewable energies. It's not really like the oil companies would have a whole lot to gain from it, and big energy producers should be aware that sooner or later they need to make the switch anyways, and because of their size and resources would be in a great position to compete with start-ups. The biofuel subsidies are presumably covered by the farm bill, so that's not it either.

Seriously, the Dems are being idiots about the Fed, the GOP are being idiots about this. Why in hell's name do you people keep electing these guys?

If demand was elastic enough to stop them from doing that, it would also be elastic enough to prevent them from passing higher production costs on to consumers. A much better idea would be to simply increase the rebates they could get for investment projects aimed at expanding capacity in one way or another. Granted, it might mean that oil companies could pay even less taxes (gasp!) and that there won't be a few extra billion dollars in the purse to be spent on vote-buying (gasp!²), but at least it wouldn't be an incentive for even higher prices at the pump. And in the long run, it might do something to alleviate the fact that demand has been rising more quickly than supply in recent times.

You'll note the article states that they can avoid the tax increase by increasing capacity by building more refineries (as well as promoting renewable energy).

Oil companies have to be keenly aware of their public image right now. If they could build more refineries instead of adding to consumer woes, while avoiding the very taxes their political lackies are arguing against, why would they not do so?

Could it be that because of their record profits they have no incentive to increase supply?

How can their argument be that increasing domestic capacity is key to solving our energy problems, while at the same time they fail to utilize an opportunity which would let them do exactly that?

Seriously, the Dems are being idiots about the Fed, the GOP are being idiots about this. Why in hell's name do you people keep electing these guys?*insert :headbang: here*
I don't. :mad:

You'll note the article states that they can avoid the tax increase by increasing capacity by building more refineries (as well as promoting renewable energy).
Yeah, but that's not the same thing. They'd be offering a lack of punishment, rather than a reward.

If they can get an extra tax break added on top of their existing cost structure, that is an argument in favour of building that extra refinery. One of many, because there are things like interest rates, property prices, various legislative costs etc etc. It's not simply a matter of not wanting to build a refinery.

If they know however that everyone is being hit with this extra tax, then that's basically a sunk cost which they'll pay regardless whether they build the refinery or not. It's outside that consideration. It will however go into their consideration for how much to charge.

Oil companies have to be keenly aware of their public image right now. If they could build more refineries instead of adding to consumer woes, while avoiding the very taxes their political lackies are arguing against, why would they not do so?
As I said, there are a lot of factors influencing whether or not a project like this is worth pursuing. I'm hardly an oil industry expert, but it just doesn't look like it's worth their money at the moment, particularly considering that shareholders want big dividends after having seen these price rises over the past year or so and managers are out of there if they don't comply.

Could it be that because of their record profits they have no incentive to increase supply?
Their existing profits don't make a difference. They consider the value of the project in itself, whether doing it will add value to the company. Whether they're making record profits or record losses doesn't change the evaluation (though it may impact on financing decisions).

It may well be that with such inelastic demand they have no interest in expanding supply and potentially seeing overall profits fall. That would depend on the details of their cost structure.

But that logic is true regardless of whether they make record profits or you tax them out of existence. The actual solution must be to make the expansion worth it by adding an incentive big enough to cancel out any impact it might have in depressing prices (all this is hard to estimate, of course, but that's what they have all their fancy departments for, right?). So the fact that they could pay less taxes by expanding capacity is a right thought. The fact that they want to create a bigger tax bill to start with is not, and seems to me based on either a real need for extra revenue or (more likely) populism.

It is not an "or" question by forcing them to invest in Alternative fuels or refinery expansion because the EPA and other congressional regulations make it nearly impossible and likely unprofitable to do so. So they really mean "alternative fuels" which often enough, do not fall in the realm of an Oil company's specialization.

So they really mean "alternative fuels" which often enough, do not fall in the realm of an Oil company's specialization.
Even though BP and Shell are both getting ahead on that game.

Even though BP and Shell are both getting ahead on that game.

Hardly.

Both BP and Shell advertise in PR campaigns that they are investing, but the amount they are investing is trivial compared to what they are investing in future oil recovering efforts.

Their existing profits don't make a difference. They consider the value of the project in itself, whether doing it will add value to the company. Whether they're making record profits or record losses doesn't change the evaluation (though it may impact on financing decisions).

I guess I fail to see, given current oil company revenues and rising energy costs, how the construction of additional refineries would do anything other than add value to the company, regardless of the tax situation.

It may well be that with such inelastic demand they have no interest in expanding supply and potentially seeing overall profits fall. That would depend on the details of their cost structure.

They fail to significantly expand domestic refining capacity when the tax situation is favorable, nor will they do so when unfavorable tax situations can be avoided through the same course of action.

Just how long do they expect the American public to ignore their obvious stalling on the issue?

But that logic is true regardless of whether they make record profits or you tax them out of existence. The actual solution must be to make the expansion worth it by adding an incentive big enough to cancel out any impact it might have in depressing prices (all this is hard to estimate, of course, but that's what they have all their fancy departments for, right?).

Apparently those fancy departments are content to keep importing refined product, rather than improve our own capacity for doing the job ourselves, while also creating jobs and reducing the cost to the consumer.

Seems to me like oil company shareholders and their political backers aren't looking at the long-term picture...it will likely bite them on the ass sooner or later.

Hardly.

Both BP and Shell advertise in PR campaigns that they are investing, but the amount they are investing is trivial compared to what they are investing in future oil recovering efforts.
As compared to, of course, none. Got any stats perhaps?

As compared to, of course, none. Got any stats perhaps?


As of February 11, 2007 BP announced that they would spend $8 billion over ten years to research alternative methods of fuel, including natural gas, hydrogen, solar, and wind. A $500 million grant to the University of California, Berkeley, Lawrence Berkeley National Laboratory, and the University of Illinois at Urbana-Champaign, to create an "Energy Biosciences Institute"[22] has recently come under attack, over concerns about the global impacts of the research and privatization of public universities.[23] From http://en.wikipedia.org/wiki/BP

So thats 800 million a year invested. BP's total revenue was $275 billion dollars for 2006. Ends up being .002 of total revenue, truly trivial and done to increase PR.

Taxing them? That's pussy. Expropriate them!

Emphasis mine



http://www.huffingtonpost.com/2008/06/10/republicans-block-extra-t_n_106282.html

How exactly is it that increased taxes on oil companies are a terrible thing that must be stopped at all costs, but increased taxes on renewable energy are perfectly acceptable? How do the same arguments fail to apply to renewable energy sources, especially when the same Republicans who voted against the measure themselves state that their own proposals will not entirely alleviate the problem?

I'm also tired of the Dems in the Senate caving every time the Republicans threaten a fillibuster. Try to pass the measure anyways, and let the Republicans obstruct it if they feel like it...given popular opinion these days, I think those Senate Republicans would quickly change their tune if they had to publically proclaim that they are for higher taxes on renewable energy but not for big oil.

Your thoughts??


I agree with Mitch McConnell frankly. It is stupid to think increasing taxes will solve this issue.

I did enjoy a chuckle at the following:

despite pleas by Democratic leaders to use the measure to address America's anger over $4 a gallon gasoline.

Adressing anger is typical, instead of addressing a solution. Let's punish someone because we are pissed mentality. Like the oil companies won't pass that expense directly to consumers. Are people really this stupid??

Oh and the priceless rant that they will 'fine' OPEC.

Honestly why do you think they cave? Because they already know it was a stupid idea to begin with. Wasting time is what this Congress does best.

Seriously, the Dems are being idiots about the Fed, the GOP are being idiots about this. Why in hell's name do you people keep electing these guys?

Because most people seem to vote based on party and not actual issues. That's the biggest problem with the American Political System. I yelled at three people who said they'd never vote republican because they were Democrats and I told them that they were stupid voters if they do not look at the overall candidate of both parties.

Taxing them? That's pussy. Expropriate them!

Bad move. That'll surely spike the price of oil if we do that. I do not want to pay even more at the pump.

Bad move. That'll surely spike the price of oil if we do that. I do not want to pay even more at the pump.

How do you figure that, once under state control price mechanisms can be suppressed.

If they can get an extra tax break added on top of their existing cost structure, that is an argument in favour of building that extra refinery. One of many, because there are things like interest rates, property prices, various legislative costs etc etc. It's not simply a matter of not wanting to build a refinery.

If they know however that everyone is being hit with this extra tax, then that's basically a sunk cost which they'll pay regardless whether they build the refinery or not. It's outside that consideration. It will however go into their consideration for how much to charge.

As I said, there are a lot of factors influencing whether or not a project like this is worth pursuing. I'm hardly an oil industry expert, but it just doesn't look like it's worth their money at the moment, particularly considering that shareholders want big dividends after having seen these price rises over the past year or so and managers are out of there if they don't comply.

I have a simpler solution. Take taxpayer's money out of subsidies, and build some damn oil refineries. Legislate that they must pay tax and make a profit for government, leaving the existing players just that much leeway to profit themselves.

What's a refinery cost? A quick google shows about one billion dollars. That's nothing, and if it didn't work out you could sell it for most of what it cost. If that was going to fubar the local market too badly, you could take it apart and ship it to some overseas customer where you wanted to fubar the local market.

Ack, I'm coming across like a cross between Andaras and Richard Armitage. I should stop.

I sometimes wonder whether or not any corporation EVER pays their rightful share of taxes. Between tax breaks and offshore incorporations and tax code legerdemain, it's a wonder there's any money in the coffers at all.