Monday, April 24, 2006

Windfall profits tax on oil?

I've seen some discussions on a windfall profits tax for energy companies that make obscene profits from supply and demand. I've not made up my mind by any means on this, and I'd love some feedback. I certainly can't blame the energy companies for making money so easily off the insatiable demand of Americans for gas, since we have done so little individually to wean ourselves. However I'm concerned that the supply/demand effect has disproportionately affected the lower class and those whose livelihood depends on gas.

One blog I read called the Global Economy has a very fiscally conservative stance, with many positions I disagree with. But this analysis is interesting nonetheless.

Here was my reply (not yet posted on his site):

I'm open to debate on this topic, but I was under the impression that the energy industry has does very little to reinvest their windfall profits these last few years. Places where money should most visibly be spent in my opinion are:
  • local exploration, to reduce dependence on foreign oil
  • improving extraction of oil from difficult local sites, including those that appear "exhausted" or others that were abandoned before the technology improves. This means more focus on recent advancements like the improvement of extraction from shale and other porous mediums.
  • improving biodiesel refining process, and discovering similar alternative ways to create distillates used in plastics and other petroleum products
  • improving local refining capacity
  • distributing local refining capacity so we aren't so vulnerable to future hurricanes
Which of these are they investing in, and in what proportion to their profits?


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