June 19, 2007

Slapping Taxes On Big Oil

Yesterday, I highlighted an effort by Senators Max Baucus and Charles Grassley to impose a new tax on publicly traded partnerships. That effort will likely result in these partnerships incorporating overseas, which will actually reduce the tax revenues coming to the federal government. Today's effort by the Baucus-Grassley partnership will do a lot more harm to American drivers, and to the overall economy:

A proposal to hit oil companies with $29 billion in new taxes advanced in the Senate on Tuesday, targeting the money to energy conservation, wind turbines, electric hybrid cars and clean coal technology.

The massive tax package, double what Democrats had talked about as recently as last week, is "designed to promote clean and sustainable energy," said Sen. Max Baucus, D-Mont., chairman of the Finance Committee that approved the measure by a 15-5 vote.

It will be added to energy legislation being considered by the full Senate. ...

On the Senate floor, meanwhile, senators rejected two proposals Tuesday aimed at accelerating the development of liquefied coal for use as a substitute for diesel and jet fuel. Environmentalists argue liquefied coal produces more than twice the greenhouse gases of conventional diesel.

I agree that we should pursue energy alternatives that reduce or eliminate hydrocarbon emissions, but mostly that reduces or eliminates our dependence on foreign sources for energy production. We can do that by leveraging nuclear power for domestic energy production while pursuing coal technology for specialties such as jet fuel. That technology can produce massive amounts of energy in the near future, while the wind-turbine technology not only has fairly severe limitations, it also gets opposed by people like Ted Kennedy when they start appearing in their backyards.

Slapping massive new taxes on oil, however, only works when people have a viable alternative to gasoline -- and we don't. The cost at the gas pumps will rise to cover the new costs, as shareholders won't like the notion of losing money on their investments. Those shareholders, by the way, include you and me -- if you have a retirement account that relies on stocks and market funds.

It won't just hike prices at the pump, either. You know who else uses gasoline? The trucks that bring goods to stores. Increased transportation costs affect prices across almost every distribution channel. Do you order on-line? The shipping costs will shortly go up. It's a multiplier effect when dealing with goods that move more than once from manufacturer to consumer, too.

In short, Baucus and Grassley have built a substantial inflation rise into next year's economy. The same Congress that demanded a minimum-increase will now ensure that the buying power of that increase gets even weaker than it will be in the long run anyway.

Remind me again why Baucus and Grassley seem obsessed with raising taxes rather than cutting spending ...

UPDATE: Heritage has taken a look at the numbers, and has state-by-state projections on how much gas prices will rise under this new tax scheme. By next year, it will climb 31 cents per gallon in Minnesota if the market remains steady -- and will go up to $6.46 by 2016.

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Comments (30)

Posted by Nellock | June 19, 2007 5:10 PM

Why are politicians always up for more money? And who are the people that actually support these stupid legislations?

Posted by Stephen Macklin | June 19, 2007 5:47 PM

This sounds a lot like Hillary's plan to seize oil company profits and fund alternative energy. We're all in this together, don't you know?

It's time for Conservatives and libertarians to step up and call this garbage what it is. Socialism.

Posted by gaffo | June 19, 2007 6:28 PM

nice how you dissmiss Solar utterly - and demean any move toward wind energy - all the while promoting NuCULAR energy.

Tell us oh wise one - WTF do you do with the waste? - oh forget, 'm asking a Republican - the same party that never thinks of conservating nor of the next generation!!

my bad.

-----------

as for gas - we should TAX THE SHIT OUT OF IT - get to 8-bucks and gallon, that will force all the single soccer mom ninnies to get rid of their SUVs and all the fake urban cowboys - you know the tards in the cities who never have driven their suppersized Truck on the dirt road!

yes - tax the shit out of gas and thus force us to buy SMALL cars - like we did in the 70's.

this is a matter National Security - choose: your fake cowboy image or defending our Nation by conserving gasoline usage?

Republicans are the party of Gluttony - supersized everything, I'm wasting my time with folks that don't care about our future as a prosperous Nation.

Posted by Fight4TheRight | June 19, 2007 6:37 PM

This has NOTHING to do with trying to fund ANY alternative energy!

This is all about some Congressmen and Senators being able to go back to the campaign trail in their home states and districts and say, "See? I stuck it to those big profit Oil Companies!"

It's too bad, many years ago that Grassley didn't see fit to go after the obscene profits of Microsoft and Intel - he could have levied taxes galore on them and now, instead of typing away on this here computer, I might be reading a book for playing ball with the kids! LOL

Posted by Monkei | June 19, 2007 6:59 PM

When are we as citizens going to step up and demand our elected officials find out why natural gas and big oil companies are making record profits ... together, as one ... not a single one of them is struggling, not a single one of them is undercutting the other to gain business ...instead they seem to work together to all make more and more record profits. When these companies act as one shouldn't our government act on OUR behalf to find out why?

We don't need more taxes, we need more oversight and regulatory work if these companies are going to act together to bilk the US public.

You can also throw in the drug industry and the insurance companies also.

Posted by Adam P | June 19, 2007 7:02 PM

Taxes on oil companies --> Higher costs for the oil companies --> Raising prices at the gas pump = Pain in the ass for the consumer --> Consumers buy less gas and/or buy more fuel efficient cars --> Car companies, in an effort to keep up with the consumer trend, invest in alternative energy sources and/or invest in more fuel efficient cars --> Less emissions, less dependency on foreign oil, and less money needed to be spent at the pump in the future!

Slapping taxes on oil does not require having an alternative energy source, but rather help initiate the development of these alternative sources. It 's not socialism nor is it rocket science... It's a responsible government measure combined with comprehension of the market. It may promote inflation in the short term, but hey, no pain no gain.

Oh, and you want to rely on liquified coal as a domestic energy source? I know we're Americans and don't have the greenest record in the world, but come on, that would put us almost on par with the Chinese.

Posted by chachi | June 19, 2007 8:08 PM

I manage the coal division of a Montana trucking company that hauls coal to a power plant. We have accellerators in our contracts that will pass fuel increases to the power company. Wanna guess who'll they'll pass the increased cost of 14,000 gallons/mo along to?

Posted by Drew | June 19, 2007 9:24 PM

The Energy Bill I would like to see:
Para 1: A listing of all previous Energy Bills.
Para 2: "The above are hearby repealed."

Perhaps when the Ethanol industry succeeds in raising food prices by 100-200%, someone will get a clue.

Posted by Fight4TheRight | June 19, 2007 10:34 PM

gaffo,

Are you suggesting that we all buy a Geo like the one that John Kerry drives up the mountain when he goes skiing?

Or have a nice little energy-efficient 2 bedroom apartment like John Edwards has?

Or..perhaps you'd like us all to emulate Ted Kennedy's 16 foot Lund tied up to the dock on Cape Cod?

Posted by mxzptlk | June 19, 2007 11:38 PM

You know who else uses gasoline? The trucks that bring goods to stores.

Actually, they use diesel oil. Diesel comes from crude oil. It yields more miles per gallon than gas. And it was unclear from your post whether diesel would be subject to the proposed tax

Posted by Josh | June 20, 2007 12:07 AM

If they really wanted to fund alternative energy, they'd pass the tax bill but allow for tax credit for research into alternative energy. But no, they're going to take the money and run with it for all kinds of other things, instead.

Posted by Ed | June 20, 2007 12:54 AM

Mr Mxzptlk, if the oil companies have to pay a higher tax on gasoline, it'll have to come out of their corporate revenues. Look at the CAFE taxes the automakers pay if they miss their projected targets, it'll work the same way. Big Oil will raise prices of all products across the board a little bit in order to do so (instead of making a single product so expensive nobody'll buy it). Congress thinks it's aiming a hard kick at Big Oil's teeth, but their aim's a little off. It's going to hit John Q Public like a blade right across the neck.

Adam P, that's a wonderful theory and all, but wringing increases in fuel economy is what auto engineers call a "non-trivial" issue. We've already picked pretty much all the low-hanging fruit. Hybrids are a non-starter (and basically an act of desperation) due to the excess weight. That extra mass won't help anything on the highway at all (esp. semis), and that's not even getting to the environmental effects of the battery materials. That pretty much leaves weight cuts, and with the new Federal rollover regs you're kind of stuck there too. Problem is that we have Lords and Ladies on the Hill who don't bother to get out and see what effects their Proclamations have in the Real World. Something's gotta give, 'cause their Proclamations are starting to run at cross purposes--and nobody wants to be the first one to give way.

Josh, those carbon credits Mr. Gore sells? They're sold by a company owned by Mr. Gore himself. Then the proceeds get plopped into just the research into alternafuels (not planting trees or othersuch, in his particular case) you mention. Guess who gets to keep the patents on inventions made by projects his company funds? Now I'm happy to see people who've been bamboozled by his spiel get fleeced--a fool and his money after all. I take a bit of umbrage though, at the thought of someone taking my tax dollars to enhance his personal wealth by so much as a single red cent.

Posted by Ed | June 20, 2007 1:00 AM

Apologies for the double-post, I should point out that I'm *an* Ed, not the good Captain.

Sorry for the (potential) confusion, Mr. Morrissey.

Posted by docjim505 | June 20, 2007 4:06 AM

Nellock wrote (June 19, 2007 5:10 PM):

... who are the people that actually support these stupid legislations?

I think the comments subsequent to yours answer the question, don't you? And look closely at their motives. In most cases, the libs who support this foolishness aren't doing it from altruism. Rather, they support these confiscatory policies out of malice, jealousy and hatred. "I want the government to f*** over people who have money! Soak the rich, those b******s! F*** 'em all!"

As I've often written before, your average lib is perfectly happy to live (or die) in absolute misery so long as everybody else suffers equally.

Sweet world they want to make, isn't it?

Posted by Gideon | June 20, 2007 4:37 AM

This was tried before. In the 1970s Congress passed a "windfall" profits tax on the oil companies. It absolutely killed domestic production. In response Jimmy Carter regulated gas prices. The result was gas rationing and lines a mile long.

Posted by Joe Doe | June 20, 2007 6:17 AM

"I know we're Americans and don't have the greenest record in the world, but come on, that would put us almost on par with the Chinese."

That is REALLY funny; by the time the American nanny state is over, you would wish that would be true indeed. The globalization imposed on the US workers will simply kill them. Not because "open border" per se, but because the political gangas in US think that they can do this with the current legal and tax burdens. "Cheap labour" is relative to dollar value, and as hollow a concept as the Federal Reserve system of fiat money.

The oil industry is Capitalism Achile's heel - and there are no signs that the Industry that is its engine can overcome the addiction. Yet to regulate Capitalism is another funny concept. In Ontario the government want to "help" the auto industry to move to more efficient models by giving them almost a trillion dollar, as if the auto industry problem in NA is the fiat dollar. You should have listen to CFRB radio's commentator - "The Auto Industry has a MORAL obligation to produce green cars". In follow-up calls, everyone approve on the concept . Wow, so for the auto industry there are no consequences for stupid planning.

The real discussion though is not so much that of energy prices but rather their valuation in fiat dollars - the nanny state keeps on telling us how controlled the inflation is, just about 2% or so. Well, maybe that is the inflation of the Chinese economy - how is that reflective on US one is not to be asked.

But there is always a funny part in all these dealings. The islamization of the continent will first hit the gay and women right movement. The inflation will first hit the coastal states and the cities. It seems that the lefties will be the first ones dissapearing first - no matter how one looks to the problem. Let them have Sharia on top - like Stein, I can grow a longer beard and who knows, maybe even enjoy the new form of slavery. With camels on the 81 Interstate to New York oil issues will be discussed only as it relates to the production of vaseline. Oh, that may be banned too, though - it might hurt ROP sensibilities.

Posted by Larry J | June 20, 2007 7:38 AM

Mr Mxzptlk, if the oil companies have to pay a higher tax on gasoline, it'll have to come out of their corporate revenues.

If you honestly believe that, then you're woefully uninformed about basic economics. Increased corporate taxes are just another cost of doing business that gets passed on to the consumer. Politicians of a certain political stripe love raising corporate taxes because it has a double advantage for their point of view. First, it lets them play to their populist base for "soaking those fat cat corporations". Second, when the taxes get passed on to the consumers in the form of higher prices, they get to demonize those same corporations once again. Try studying some economics. It'll open your eyes.

Posted by NoDonkey | June 20, 2007 8:10 AM

I'd like to see a 98% tax on all revenue "earned" by lawyers and a 100% tax on all of the money stolen by Democrat politicians (e.g. Rep. William Jefferson, Sen. Harry Reid, Sen. Rodham, Rep. Pelosi, Sen. Feinstein, etc.).

This would kill our legal lottery system, lower medical costs and force Democrat pols to find honest work for once.

As far as oil? Easy. Drill ANWR. Drill off of the coasts. Drill the heads of wooden headed Democrats. Start nukes.

And make windmills out of spreadeagled environmentalists like Al Gore - all of that hot air might do some good for a change, if he's chained to a structure, 100 feet above the ground, with seagulls crapping on his head.

Posted by Scott | June 20, 2007 9:57 AM

You know, I really DESPISE people who tell me taxes should be raised to FORCE me to do something someone ELSE wants me to do.

Buzz off.

I know there are some people who don't get out much, but there really are millions of low income people who drive to work everyday. They have no other option, as they work odd hours, nights, weekends, etc, when "public transportation" is not available - or perhaps they just don't want to spend 4 hours getting to work on 3 buses. Your proposals on gas taxes will kill these people. Do you not understand this?

The SUV has been the punching bag for far too long. There is nothing wrong with SUVs. You want to get rid of gas guzzlers? Fine - they pay people with old, large cars to get them off the road.

I fully support mandatory solar panels on the roofs of all new housing in the southern tier of the country. Why it's not already a requirement in places like Southern CA and Phoenix is beyond me. That's a proposal that makes sense, and it would lower the cost of solar for the rest of us.

I fully support nuclear power. I don't give a rat's ass about the waste. We'll figure it out. That's what people DO with problems.

I fully support shale oil, liquified coal, and anything else that helps us NOT burn oil. Why on Earth anyone is burning oil to heat a building is beyond me. Nukes could supply 80% of electricity in this country if given the chance.

I fully support bringing the very efficient diesel engines in Europe to American cars.

However, I do NOT support coercion, threats, vodoo science, and just plain hooey, like the crap Gore is peddling.

The planet is not dying. It's heating up and has been for 300 years.

Let's get over the hype, roll up our sleeves and solve problems.

I, for one, have no intention of allowing the Green Nazis to force me to live in the Ewok village.

Posted by Other Ed | June 20, 2007 10:47 AM

Larry J, you are of course correct. I took it as a basic given that corporate revenues are paid by the customer, by buying product. I thought it went without saying. I didn't mean to give the impression that "corporate taxes" are something companies pay with some magical money that comes from nowhere (what legislators think is the definition of "profit"). My point was that it wouldn't make any sense for an oil company to put the full tax burden on gasoline, seeing how the Heritage Foundation map expects price increases of over 100%. That's a great way to destroy your market (which to be honest, is the real world objective of this Watermelon legislation-- looks Green on the outside, but Red all the way through). What I expect is that the tax will get spread across all products made by Oil Brand X, so if you need some 10W-30, that'll cost more too. Diesel, ditto. Even the kerosene-based jet fuels will get socked. And yeah, any unnecessary price increase in the face of competition from abroad is our economy "getting socked."

Posted by Stephen Macklin | June 20, 2007 12:28 PM

Scott,

You rightly oppose the environmental socialists using taxes to force you to do something in one sentence, then you turn around and support mandating half the country install solar panels in another.

You have no intention of allowing the "Green Nazis" to force you live in an Ewok village but you have no problem mandating all new housing in half the country incorporate solar panels.

What is it to be - freedom of choice or state control?

Posted by KW64 | June 20, 2007 2:33 PM

You nailed this one Captain.

Wind power costs too much for manufacturing to be competitive when the construction and transportation capital costs are figured in. It also is not base load power since sometimes (often hot afternoons when the demand on the grid hits its peak) there is no wind.

Pete Domenici of New Mexico is exactly right in saying that nuclear power is the proper source of new generating capacity;, not natural gas which is already having to be imported and is too expensive, not solar which is woefully uncompetive in price nor wind. For liquid fuels we need coal converted to liquid hydrocarbons or develop cellulosic ethanol. In the meantime maybe we can lift the tarrif off Sugarcane based ethanol imports.

If government lets the markets operate, that might just be the best solution.

Posted by MarkW | June 20, 2007 2:35 PM

there's a very good reason not to consider wind and solar.

They don't work.

As to nuclear waste, there's an easy solution to that problem, but as usual, the govt gets in the way. The answer is to reprocess it. But that was outlawed under Jimmy Carter.

As to your desire to tax the shit out of everyone who owns stuff that you can't afford ... Man, do you ever sound like a liberal, complete with the obligatory insults to anyone who doesn't think like you do.

Posted by MarkW | June 20, 2007 2:41 PM

Monkei,

If the oil companies were to cut the price of gas to the point that they made no profits whatsoever, the price of gas would drop maybe 3 or 4 cents a gallon.

So drop the "I hate everyone who makes more than I do" liberal schtick. It's getting old.

Posted by MarkW | June 20, 2007 2:50 PM

AdamP,

So what? It's not like CO2 is causing a problem or anything? Heck, when add up all the pro's and con's, enhanced CO2 is good for the environment.

Posted by MarkW | June 20, 2007 3:01 PM

Scott,

If solar panels on roofs made sense, people would already be doing it.

The problem is, that you don't get enough energy from a solar panel over it's life span to cover the cost of installing one. (Except in places that are well off the grid.)

Heck, you don't get enough energy out of solar panel to cover the energy required to make that solar panel. Net to net, solar panels consume energy, they don't produce it.

Posted by gaffo | June 20, 2007 6:16 PM

"gaffo,

Are you suggesting that we all buy a Geo"

yes - thought that was self evident.

time to do our Civic Duty for the future of America.

Posted by gaffo | June 20, 2007 6:50 PM

"You know, I really DESPISE people who tell me taxes should be raised to FORCE me to do something someone ELSE wants me to do.

Buzz off."

Know what I hate more - a selfish man-child (Veruca Salt? that you?) who demands his right to gluttony at the detriment of the future security and welfare of the United States of America!

we call them Traitors.

Force? - a taxing a good is not the same as making said good illegal - so enough of the hysterical lies chump.

go ahead and buy that Hummer traitor - its not illegal to undermine the United State's future.


"I know there are some people who don't get out much, but there really are millions of low income people who drive to work everyday. They have no other option, as they work odd hours, nights, weekends, etc, when "public transportation" is not available - or perhaps they just don't want to spend 4 hours getting to work on 3 buses. Your proposals on gas taxes will kill these people. Do you not understand this?"

no it will not - if they are poor they have no business driving a junked towncar when they could sell said car for 500 and buy a 500 dollar junk Geo Metro.

just as you could.


"The SUV has been the punching bag for far too long."


Too long? The SUV didn't even fucking exist before the mid-90s!!!!!! now they are ALL OVER THE PLACE........driven by single middle ages childless Women!!!

idiotic IDIOTIC!


"There is nothing wrong with SUVs."

there is if you don't need one. you are undermining the future of America by being glottonous and buring a finite resource - a recource that we are already fighting quagmires over - and lossing both the wars and a shitload of money down those two ratholes (esp. Iraqnam). so your glottony is destroying our economy as well bubba.


"You want to get rid of gas guzzlers? Fine - they pay people with old, large cars to get them off the road."


ok - good.

"I fully support mandatory solar panels on the roofs of all new housing in the southern tier of the country. Why it's not already a requirement in places like Southern CA and Phoenix is beyond me. That's a proposal that makes sense, and it would lower the cost of solar for the rest of us."


absolutely!

"I fully support nuclear power. I don't give a rat's ass about the waste. We'll figure it out. That's what people DO with problems."

don't give a rats ass - huh? just let your kids worry about it, you be dead so who cares what happens - right?

you gotta be a Republican with at attitutude!

"We figure it out" - oh sure, is that a "faith based" prediction without facts to support your assurtion?

I'm sure Chernobyl was just a myth - could never happen again - esp. here in the US.


"I fully support shale oil, liquified coal, and anything else that helps us NOT burn oil. Why on Earth anyone is burning oil to heat a building is beyond me. Nukes could supply 80% of electricity in this country if given the chance."


Nuclear waste is impossible to contain for 20,000 yrs - not to mention the tons of plutonium sitting around for some guys to buy on the black market and build a bomb.more nuclear power plants higher the risk of the above happening. and such brilliant decisions to build siad plants 2-miles from eathquake faults and on coastal cliffs in high population areas.

"I fully support bringing the very efficient diesel engines in Europe to American cars."


non-sense. if not the "Efficient diesel engines" - its the SAME OLD STORY - SMALL 4 BAMGER ENGINES.

Petrol engines are "efficient gasoline engines" if you are willing to drive a car like the Yaris!! SMALL.

and no, you will not get an "effiecent diesel engine" for your SUV.

you cannot make a purse from a sows ear.

"However, I do NOT support coercion, threats, vodoo science, and just plain hooey, like the crap Gore is peddling."


Gore - I never bothered to listen to him. why do you?

You know - if you are old enough - you will remember the 1970's and how America tightened her belt and there was a civic sense of a Patriotic duty to Conservation. That meant SACRIFICE. the WW2 generation knew about this with rationing - and all were willing. Same with the Depression Generation.

Today it is all about ME ME ME ME! children all. When the fuck did Gluttony become a VIRTUE anyway?

Sad but true - the spoiled modern generation that America is now made up of does not desirve a future..........................but their children do even if you don't think so.

"The planet is not dying. It's heating up and has been for 300 years."

Dying? I hope not - why do say this?
Global warming is real - and it looks like it is man made...............more and more so with each passing year.

"Let's get over the hype, roll up our sleeves and solve problems."

Hype? being dependant on Middle East oil is more than "hype" it is poor National Defense policy!

Solving the problems is EASY - only YOU ARE NOT WILLING TO DO IT!!!!!!
Solution is CONSERVATION (not some miracle elixor).....................rid the US road of HUGE TRUCKS AND SUVS and drive SMALL CARS.

simple, but it requires work - something gluttonous Americans seem to be allergic too.

"I, for one, have no intention of allowing the Green Nazis to force me to live in the Ewok village.
Posted by: Scott at June 20, 2007 9:57 AM"


thanks for undermining and subverting the future of America Scott. You are a poor citizen with no sense of duty not your Nation.

sad - most Republicans are like that.

Posted by gaffo | June 20, 2007 7:02 PM

"As to your desire to tax the shit out of everyone who owns stuff that you can't afford ... Man, do you ever sound like a liberal, complete with the obligatory insults to anyone who doesn't think like you do."


nice - another Selfish Republican choosing his personal desire for Gluttony over the Future Security of the United States.

Repugs are coming out of the wood work here.

First Repug who is willing to choose his Nation over his self Gluttony gets a compliment from God.

Posted by stuart | June 20, 2007 8:17 PM

Where do the dollars come from that are used by the oil companies to pay for exploration and development of the oil that ends up getting refined and gets me to work every day where I provide hight paying jobs for approximately 50 people? A recent study of the 10 yr. period of 95-05 revealed that the industry spent 150billion more than they made in profits for that time frame for those purposes. So let's follow the demagogue's advice and punish ourselves by this crazy tax scheme.