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Tax Oil Companies to Help Energy Conservation Efforts
In a recent [Bangor Daily News] home improvement column, my friend Tom Gocze advises readers to meet the current energy crisis through energy conservation by superinsulating their house.
Unfortunately, many of us, myself included, were slow to act in part because fuel costs were so low for several years. Oil prices, dictated in the short and even medium term by speculation and national and world business cycles, can fluctuate rapidly, making long-term energy planning decisions hard for homeowners and businesses. Today, many are too strapped to make the most effective long-term investments in energy conservation. Nevertheless, fluctuations in energy prices haven't hurt everyone. Perhaps it would be appropriate, if I may use the ugly "t" word, to tax some of those who have profited inordinately from -- and perhaps had a role in fostering -- the vast recent run-up in oil costs.
Many homeowners are commendably scraping the bottom of the cookie jar for energy efficiency projects. Do-it-yourself skills, so widespread in Maine, are more useful than ever. Nonetheless, the economic equivalent of a perfect storm has left many residents too pressed to take the longer- term steps needed to save on daily energy costs.
Since 2000 two bursting bubbles, stocks and housing, have hit workers. A sluggish recovery from the former and even deeper prospects from the latter still hang over us. The approximate doubling in home heating oil prices over the last year has come just as the news on both the wage and housing fronts has become bleak. Many middle- and working-class residents have never had a greater need to save on energy costs and never found it harder to fund long-term energy improvements.
ExxonMobil, on the other hand, reaped a profit of about $40 billion last year. The company claims it needs the profits from the good years to make up for times when oil is cheap. Yet the company controls vast reserves from which it can pump oil for about $20 a barrel. It even profits with oil at $40. The profits these companies have made are not necessary to sustain current production and are a consequence of a random concatenation of events, including China's growth and the Iraq occupation. As Multinational Monitor's Robert Weissman points out, they represent a windfall in the literal meaning of that term.
ExxonMobil portrays itself as a typical business responding to market forces. It views any new tax proposal as interference with the free market. But as Orono writer Wayne O'Leary has pointed out, consolidation among the major oil companies in the last decade should put to rest any notion that there are ordinary competitive businesses. The seven sisters of the '80s and '90s have now become the big four. When industries consolidate, they can often -- without breaking any laws -- recognize the mutual gains to be achieved by tacit cooperation in limiting supply and increasing prices. Not surprisingly, the increase in gas and home heating oil prices during such recent disruptions as Hurricane Katrina has exceeded those of earlier supply crises.
Even if oil company profits do not reflect monopoly pricing power, they are still attributable to forces beyond ExxonMobil's skills in finding and delivering oil. Tax favoritism going back to the 1950s helped the oil giants acquire the easy oil on which they make such large profits as world oil prices increase. In addition, U.S. foreign and military policy -- with its enormous costs in lives and taxpayer dollars -- has since the 1930s been devoted to assuring corporate access to foreign oil.
ExxonMobil maintains that its extraordinary profits will be devoted to the expensive quest for new oil reserves, but the company spent more than $36 billion in share buybacks and dividends in 2007, far more than on exploration. (As investigative reporter Greg Palast recently reminds us, even The Wall Street Journal dubbed Exxon's investments "stingy.")
Just as importantly, the company blitzes the political process with campaign contributions and the media with glitzy advertising. It continually bolsters its corporate image and strives to entrench public commitment to an energy security precariously based on continuation of the hydrocarbon age.
That ExxonMobil and its corporate brethren might eventually exploit the Arctic reserves or extract more oil from tar sands is surely possible. Nonetheless, these immense undertakings represent money not available for conservation or alternative energy. When a small group of giants control so much capital, their decisions shape as much as respond to "market forces," especially in circumstances when ordinary consumers are so stretched. Those outside the privileged circle, including most small businesses here in Maine, are strangled.
A modest tax on the windfall gains enjoyed by virtual monopolies and used to fund public transit, home weatherization and alternative energy would be not only prudent but also morally appropriate.
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22 Comments so far
Show AllTax users at the pump! I dont have a car and I invested in oil because I saw people driving hummers. Dont talk to me about moral appropriateness!
Nationalize the oil companies.
The way to nationalize the oil companies is to retroactively repeal the oil depletion allowance and change it to value into an oil depletion tax. The oil being depleted belonged to the nation, after all, and not the oil companies. Charge the oil companies both the unpaid tax and the oil depletion tax in arrears. They will be unable to pay, and so their assets could be legally seized. It was LBJ who passed the oil depletion allowance. When questioned about the matter, JFK said that he saw no reason for special treatment for any industry in the matter of taxation.
Nationalize the oil companies.
I would suggest, in addition to the above, that there be a ten cent per gallon federal tax on gasoline used exclusively for conservation efforts (tax credits for solar, wind and other alternative energy production methods, etc. Such a tax would hit hardest those who use the most--in their hummers, SUVs and other gas hogs. It would also hit the recreational users who burn up millions of gallons every weekend in their boats (some cost $100 a day) , off-road vehicles, snow mobiles, dirt bikes and motor homes. It would also hit the "keeping up with the Jones" homeowner who thinks it is a moral obligation to have a manicured lawn at the cost of a gallon of gas every week. It took $4 gas to make people start thinking conservation. It will take $5 gas to get them to commit.
I'm against unimaginative, 'after the fact/retro tax' . Those companys made profit from 'nafta-ized' laws and deregulations now in effect. I can't hold that against them, using the system (legally)to their advantage is really the only option they have. I would rather blame the WTO, and US government for the lack of leadership. Even the publishers in Maine should know that alot of commodity price increases are due to: inflation & uncontrolled speculation, and yet all they can think about is taxes??? I'm almost sure these oil companys pay plenty -right now- on their profits.
wild
ClassAct June 24th, 2008 1:50 pm
Now thats a very good idea. Can't go for Nationalizing anything (told Cindy I didn't agree with everything she had in mind), but I like this one!
I think anyone should drive whatever they can afford to drive. Well, now Hummers, hhuuummmmm.
End income tax on incomes under 100k. Make up the lost revenue by large tax increases on energy. Exon's 40 billion profits is at least in part a theft of our natural resources. It's time to change the rules.
No one ever mentions the extra tax cuts and generous rebates for oil pumped from public lands, which Bush gave the oil companies over and above the corporate tax cuts in general.
These tax cuts are still being given to Exxon et al. Yes we should have a windfall profits TAX on these obscene profits (especially during a war) but we should end the tax cuts given to Exxon et alia.
Why are they getting tax cuts right now at all?
"Tax users at the pump!"
Perhaps, but the poor will suffer the most from this.
"tax increases on energy. Exon's 40 billion profits"
No no no no. This will always be passed on to the consumer and/or cause shortages. You can't force a business to be in business if they don't think it's in their best interest. They'll simply stop producing as they get to the threshold where the additional taxes added will make it not worth their effort.
Yes, lets nationalize the oil companies. Then they will be as efficient as our military and Fema seem to be. No waste, and everything done sensibly with perfect accounting.
This is still a free country, so rather than gripe about the profits of oil companies, maybe buying less house and vehicles and investing in oil stock would have been a good move for many people. The profits would not seem so bad when the dividend check arrived.
We do not need the Repugs privatizing everything, and we do not need to start nationalizing companies either. Our oil prices were just fine until the Bush war screwed it all up.
Kernel,
Republicans are good at making government as inefficient as possible. You could have agencies that worked if you voted Democratic more often or held the Republicans accountable.
-John
ps
Total freedom might mean total injustice.
I for one would like to work toward having a little justice.
Tax oil companies to help redistribute their extortianate profits and encourage them to bne less piggy with their pricing, executive perks, and CEO salaries.
Throw them in jail first.
"Tax oil companies to help redistribute their extortianate profits and encourage them to bne less piggy with their pricing, executive perks, and CEO salaries."
What you propose would be passed on to the consumer, cause shortages, and hurt people's retirement nest eggs. The CEO portion of their expenses are actually quite small when viewed as a percentage of the whole.
Butterfield___Been a Democrat for 40 years.
"We do not need the Repugs privatizing everything, and we do not need to start nationalizing companies either. Our oil prices were just fine until the Bush war screwed it all up."
Perfectly said.
Nationalize the oil companies -- brilliant.
No wait, I have a better idea, lets nationalize the minds of Cindysheehan, ClassAct, John F Butterfield, etal. Perhaps they can contribute to the national good by working on the Bush Presidential Library (of course, after we send them to Ben Stiller's school for people who don't read good)
Maybe some public accountability would be better than that provided by the market, which is none.
"Our oil prices were just fine until the Bush war screwed it all up."
Does not stand up to srutiny. Nothing in th "Bush war" in the last year explains doubling of oil prices over the same time period.
John Buell's article on taxing excessive oil revenue to fund public transit, conservation and alternative energy would benefit the public and the economy only insofar as these funds are directed to a wise mix of alternative energy. New alternative energy, as we have seen, is largely a corporate sham.
Most of the technology to have an abundance of cheap, environmentally benign energy was pioneered decades ago, the only problem being that it makes obsolete the energy grid that is holding the world hostage. Let's end this ridiculous 51¢/gal. subsidy for ethanol production which goes mostly to the big agricultural corporations (Cargill, Monsanto, Archer Daniel Midlands) and promote some really effective alternative energy plans. Ethanol from sorghum yields four times the energy output/input ratio as corn, and I've heard that hemp can do even better. Tax incentives for wind and solar would be capital more wisely invested. The 1-1 output/input energy ratio for ethanol from corn is advantageous to petroleum importers in that the more ethanol we produce, the more imported oil we need to produce it.
Let's fund the production and fine tuning of Brown's gas or HHO for home and auto use. Hundreds, perhaps thousands of home experimenters and handy persons are fueling their autos and heating their homes on it; yet the energy industry and corporate media do not permit its discussion. Its use eliminates particulate and CO 2 pollution with a waste product of only water vapor. Heat pumps and refrigeration technology can be made 700% efficient. Why can't we talk about them and fund incentives for their production? Magnet- based motors can power households and industries (theoretically even metal smelters) using FREE or zero-point atmospheric energy.
Is university science and Congress permanently out- to- lunch? They teach the 19th Century concept that for the water molecule to be cracked to yield its components of hydrogen and oxygen, it must be assaulted with thousands of watts of electricity in a prohibitively expensive process. They will not consider the proven process of a cheap water breakdown using low- powered pulsed radio frequences.
The most elementary engine modification is realized by running the fuel line through the exhaust manifold to vaporize the gas or diesel before combustion. Such a device can render an efficiency of 200 mpg for an ordinary internal combustion engine; yet such alteration is prohibited by government imposed catalytic converter laws. This simple technology was advanced in the 1920's but the patents were bought up and suppressed by the auto-energy cartel, the same corporate outlaws who annihilated street cars, trollies and any kind of efficient public transportation. If fuels were burned completely there would be no need for catalytic converters.
The government and the dominant energy industry is the problem. You (who claim to be interested in solutions), do something about it!!!!! Meanwhile, those of us who have 'the hearing ear and the seeing eye' are altering, experimenting and modifying, even coming off the grid. 'Come out of her my people' from Rev. 18 applies precisely to this era when Empire America is having her last hurrah!