Should the OIL companies be subject to a WINDFALL profit tax?

Discussion in 'Commodity Futures' started by gharghur2, Sep 28, 2005.

  1. All you guys are professionals, or at least most...

    Do you think we should return to a windfall profit tax, like in the Jimmy Carter era?

    Exxon made $7 billion profit last quarter, more money than the total capitalization of most listed companies.

    I just get the feeling this is going to be the new Capitol Hill debate....

    What's your view?
  2. Hi Tony,

    I think I am anything but a pro but I'll give it a try.

    Oil companies are living a bull cyclical market that may or may not slow down but certainly is not gonna end anytime soon.

    They also are grossly undervalued the p/e multiples are still based on 30-40 a barrel oil.

    So the fact that they are profiting a lot from present prices and will sure continue to do so even if prices drop to 40 (very unlikely) is a sign to me that this trend is gonna carry on and all this factors put together should be enough to exercise some pressure to make oil companies pay some kind of contribution from which the environment is gonna benefit upmost.

    My couple of cents
  3. Hi PP,

    I agree with your scenario, and I think something like this my already be priced into most oil stocks. Yes?

  4. Only if we give them refunds when prices are low, like they were not so long ago, this way we'll smooth out the boom/bust cycle that occasionally gives us high prices and pols calling for windfall taxes.

    Remember, crude was in the 20s for most of 2002 and earlier and was under $10 in 1999. Low prices mean less is spent on e&p and causes shortages down the road.

  5. GTG


    Only if we want to take away the incentive for oil companies to invest in new capacity. Excess profits are what encourage oil companies to take the risks and invest in finding new sources of oil. Taxing the "excess" profits will virtually assure that oil prices will continue higher into the future for years to come.
  6. Then maybe we should allow deductions for capital investment and exploration expenses and institute a windfall profits tax.
  7. What's so special about oil that it makes liberals lose their remaining common sense, not to mention any econ 101 they managed to pick up in college? MSFT and INTC have profit margins 50 times what the oil companies do, courtesy of a government-granted monopoly. I don't hear any calls for excess profits taxes on them. How about evil real estate developers? They despoil our pristine environment and take advantage of numerous subsidies. No calls for windfall taxes there, even after the sharp runup in land prices.

    No, for some reason oil has a hold on the liberal mind. Well, if you want shortages, gas lines and increasing dependence on foreign oil, a windfall profits tax is the way to go. You can tax them, but you can't force them to drill.

  8. I think its ridiculous though that they are not regulated the way the electric and water utilities those two industries you have to get approval to raise rates....why is oil exempt???? LOBBYISTS!!!
  9. Didn't know LOBBYISTS trade on NYMEX; thanks for the tip.

  10. jason_l


    excess profit tax? regulation? I would have hoped folks here would have more sense... "I want to trade the markets, but I'm a socialist and don't believe in market economies or capitalism".
    #10     Sep 28, 2005