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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.