(The Center Square) – President Joe Biden’s pledge to impose a Crude Oil Windfall Profits Tax on U.S. oil and natural gas companies if they don’t increase production to “bring down gas prices” is another failed Democratic policy, critics, including a former Treasury Secretary, argue.
In a speech one week before midterm elections, Biden said the companies have “a responsibility to act in the interest of their consumers, their community and their country, to invest in America by increasing production and refining capacity. If they don’t, they’re going to pay a higher tax on their excess profits and face other restrictions.”
His threat has been seen as an election ploy by those who point out only Congress can levy taxes.
Others simply say it won’t work, pointing to former Democratic President Jimmy Carter’s Crude Oil Windfall Profits Tax Act of 1980. It imposed a 70% excise tax on some oil sales in response to record-high inflation that saddled Americans with sky-high grocery prices, housing costs and long gas lines.
According to the Congressional Research Service, the tax reduced domestic oil production by 3% to 6% and increased foreign oil imports by 8% to 16%. It also cost the industry $38 billion in revenue and nearly 1.3 billion barrels of domestically produced oil, the American Petroleum Institute reports.
“High oil prices are a signal of strong demand and scarce supply, and they provide an incentive for increased production,” the Tax Foundation argued in 2008 in response to then president-elect Barack Obama initially vowing to reinstate it. “Taxes discourage production because they drive a wedge between the price paid by the consumer and received by the supplier. Windfall profits taxes also drive up oil imports because they discriminate against domestic oil producers to the benefit of the Saudis and the Venezuelans.”
One day after Biden’s speech, Larry Summers, former Clinton administration U.S. Treasury Secretary and Obama administration economic advisor, said he didn’t “understand the argument for a windfall profits tax on energy companies. If you reduce profitability, you will discourage investment which is the opposite of our objective.
“If it is a fairness argument, I don’t quite follow the logic since even with the windfalls Exxon has underperformed the overall market over the last 5 years.”
In March, U.S. Rep. Ro Khanna, a California Democrat, introduced the Big Oil Windfalls Profits Tax Act. It would impose an “excise tax on the windfall profits of crude oil on taxpayers who extracted and imported more than 300,000 barrels … of taxable crude oil (i.e., crude oil, crude oil condensates, and natural gasoline) in 2019, or who extracted and imported that amount in the current calendar quarter,” according to the bill summary.
Democratic California Gov. Gavin Newsom has proposed a windfall profit tax on refining profits – after California enacted a plan to ban the sale of internal combustion engine cars by 2035 and diesel trucks by 2040. As California has imposed more regulations, its oil production has declined by 70% since the 1980s; Californians now pay the highest gas prices in the U.S.
As of Nov. 1, Californians pay the highest average $5.54 for a gallon of regular gasoline; Texans pay the lowest average of $3.17. The national average is $3.75, according to AAA. Last November, Californians paid $4.06; Texans paid $3.05.
On Oct. 29, President Biden took credit for gas prices dropping by roughly $1.25 a gallon since the summer. He said, “that’s adding up to real savings for families. We’re continuing to take action to decrease prices at the pump,” in part by releasing a portion of the Strategic Petroleum Reserve.
In March, the White House announced another drawdown of 1 million barrels per day over six months. Equating to 180 million barrels – it was enough to meet nine days of U.S. oil demand or fewer than two days of total global oil demand.
A July Department of Treasury analysis estimated the drawdown would only lower gas prices by 13 to 33 cents a gallon.
The SPR currently holds the lowest volume since November 1984, according to the U.S. Energy Information Agency. As of Sept. 16, the SPR holds 427,158 million barrels compared to 644,818 million barrels the week of Sept. 20, 2019.
Biden’s claims, Daniel Turner, Power The Future’s Founder and Executive Director, says are another attempt to “shift attention from [his administration’s] colossal failures.”
“Only in Joe Biden’s mind does it make sense to lower prices by raising taxes,” he said. “Raising taxes will do nothing to address our current supply imbalance or lower prices for consumers who are already suffering under Biden’s inflation tax.”
The U.S. Oil and Gas Association said of the president, “Chest-pounding against an entire industry sector and its millions of workers is a pretty weak closing argument for mid-terms that don’t appear to be going your way.”
One aspect that policymakers “fail to put it into the perspective,” Phil Flynn, a senior market analyst at the Price Futures Group, explains to Fox Business, is “how much these companies have to invest to bring supply to the marketplace” and the plethora of “government regulations that have restricted supply” causing prices to increase. They also don’t “take into account that most of these energy companies in the past were losing money just a few years ago.”
In 2020, over 100 U.S. oil and natural gas companies filed bankruptcies, with the most in Texas. Since then, and despite high inflationary costs, Texas has continued to lead the U.S. in oil and natural gas production and job growth.
“Those that were able to stay in business in 2020 lost tens of billions of dollars due to the sudden drop in oil prices,” Ed Longenecker, president of TIPRO, told The Center Square. “Setting a precedent that manipulates market principles when companies profit but allows them to lose when times are bleak ensures that corporations will limit their investments in the future and denies producers the opportunity to succeed in a free market system.”
Instead of repeating “the policy mistakes of the 1980s,” he said American leaders should “embrace pro-growth policies to encourage, not punish,” the oil and natural gas industry.
Is this a meeting of the mindless?
Mindless in socialist insanity and Trump derangement syndrome. Thanks to Joe’s clusterheaded economic policies that demean the value of the dollar faster than any person or company can earn it, there is no such thing as “Windfall” Profits, Just pittance profits that might, if you are lucky, keep you equal with the true value of what you have earned after taxes and inflation. If the government was forced to be able to only tax the true value of your profits after their own created INFLATION, they would glean no taxes worth taking. Any political “Windfalling” criminal who tells you otherwise is guilty of windy fallen oratory where the truth is blown out the window. I lived through the Carter administration of Housing industry killing 18% mortgages, and block long, hour waiting gas lines hoping for the privilege of paying double the cost of gas your station was lucky to have a supply of, that runs out of gas just before it is your turn at the pump. That which people and companies get taxed to death on, are things that they stop producing which just accelerates the economic fall from economic productive to economic destructive.
Yea, a regular zombie horde.
“President Joe Biden’s pledge to impose a Crude Oil Windfall Profits Tax on U.S. oil and natural gas companies if they don’t increase production to “bring down gas prices” is another failed Democratic policy, critics, including a former Treasury Secretary, argue.”
The Democrat Party and their sock-puppet Joe Biden and everybody else knows that companies DO NOT pay taxes, they pass the tax down to the consumer – You and Me! This Democrat Party Tax will only make fuel and energy MORE expensive for You and Me! 🙁 🙁 🙁
a portrait of a democrat dumpster fire.
I confess I was an idiot ! I was a democrat,but I voted for Nixon in 72 ( 1000 % Magovern was sickening ) .Gerald Ford was an incompetent dufuss .Whip Inflation Now , my arse ,he made Carter look good .A couple of years into his term Jimmy was proving to be more incompetent than Ford . James Fallows wrote an article in the Atlantic titled “the passion less presidency ” . One quote stood out ; “What we all thought were the tips of icebergs,were simply floating chunks of ice” Thank God we voted for Ragan ,and I never looked back . I never thought Carter was evil or hated the U.S.A. I can not say as much for Biden ,hussain Pilosi schumer and Mitch ,and many many more.
5
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I think old mindless Joe’s ranting and raving about “excessive oil &gas company profits is just another demonization of an industry he’d like to get his bloody paws on . He has done about all he can to damage domestic energy production .If he bankrupt them .or claim that they are unpatriotic or undemocratic he will try to Nationalize them . Other Tyrants have . used this idea for decades .They critesize Restrict demonize and finally nationalize. And the dems call us nazis ?
I thought companies, had a “Responsibility to act in the interest of their SHARE HOLDERS”.. Not customers.