Senate Republicans Block Windfall Profits Tax on Big Oil Companies
Democrats fall eight votes short of preventing filibuster
With gasoline prices topping $4 a gallon, Senate Democrats wanted the U.S. government to throttle back on the billions of dollars in profits being taken in by the major oil companies. But with the White House threatening a veto of the bill, the Senate voted 51-43 to close debate, well shy of the 60 votes needed to avoid a filibuster.The proposed windfall profits tax would have been somewhere between 10 and 12 billion dollars for this year, and it would have been levied against the country’s five largest oil companies. The legislation would have also rescinded $17 billion in tax breaks the companies expect to enjoy over the next decade.
“The oil companies need to know that there is a limit on how much profit they can take in this economy,” said Sen. Richard Durbin of Illinois, warning that if oil prices are not reined in, “we’re going to find ourselves in a deep recession.”
- » See also: Whistleblower: World Running Out of Oil Faster Than IEA Says
- » Get Gas 2.0 by RSS or sign up by email.
A statement issued by the White House’s Office of Management and Budget (OMB) said, “Rather than addressing the principal cause of fuel price increases — rising world petroleum demand without a similar increase in supply — (the bill would) undercut U.S. energy security and decrease U.S. energy production, thus exacerbating market tightness and increasing energy prices.”
I find it quite striking that the White House is still claiming that the principal reason for the precipitous jump in oil prices is the rise in global demand, when according to Chevron Vice President of Strategic Planning, Paul Siegele, demand is not currently on the rise. Siegele raised this very point with me less than two weeks ago at a panel discussion at Stanford. (For more on the slowing of global oil demand, this article in MarketWatch reports on the International Energy Association’s projected slowdown).
Following the bill’s defeat, Democrats said they may work on separate legislation to increase oversight of trading by the Commodity Futures Trading Commission. Many argue that one of the principal drivers of rising gas prices is actually because of futures speculation on the commodities market. Sen. Charles Schumer (D-NY) said that parts of the windfall tax bill including commission provisions could be split into separate proposals.
Looking for more political content? Red, Green, and Blue: Environmental Politics from Across the Spectrum.
Posts Related to Oil Companies and Gas Prices:
- Mistake by Interior Department may cost taxpayers billions in lost royalty payments
- “Senate to Vote on Renewables as Early as Today“
- “Popping the Oil Price Bubble“
- “Can Hillary Take On Big Oil?“
Photo: Glass Window via flickr under a Creative Commons License
Why do the left/liberals/democrats react to every crisis with a call to raise taxes? There’s an easy way to lower gas prices: open up protected areas to drilling and allow more refineries to be built. That’s what Americans want. The poorest Americans are hit the hardest by high fuel prices. They can’t spring to the dealer and buy the latest sun powered wonder car. There’s plenty of oil. Now get busy and pump it.
Who needs oil companies?! Oil is a social need, let’s socialize its supply and cap private sector profits at zero!
Joey please read my earlier comments.
There’s already a surplus of oil and consumption is down due to prices. All we succeed in doing by drilling is further harm to the environment. It won’t lower prices or taxes. It will add ONE day worth of oil to the global consumption. If you think there’s a shortage, then do your part and conserve, maybe by riding a moped instead of a SUV. It makes more sense than drilling. You’re crying like a baby and acting spoiled.
As far as raising taxes. McCain has to raise taxes as well. There’s no other alternative to achieve a balanced budget. There’s no other alternative if we want to continue to support our senior citizen’s lifestyles. At least we can vote for a person who’s honest about his plans to raise them.
Thanks for the link, Bill. I don’t think anyone thinks it’s a great idea to continue to depend upon fossil fuels. The debate over increasing domestic production simply has to do with whether this will help to ease the transition, as we continue to perfect alternative fuels.
High gas prices have changed people’s behavior lately in objectively constructive ways, but if it goes on too long it might have a bad–and lasting–effect on the economy.
Right now companies like Shell ARE investing a lot in finding new sources of energy–both unorthodox sources of petroleum, and alternative fuels. Instead of hitting ‘em with a windfall tax, we should get out of their way and let them keep working on this.
We all see the clock ticking.
The price of a barrel of oil doubles, the amount of investment in order to buy that barrel of oil doubles, dollar amount of return doubles, but the percentage of return on dollar invested stays the same, - What’s the Problem?
What I haven’t heard from the bloviators is what percentage of return on investment should be the legal limit. Should 9% be the limit, that is about the oil industry averages? Should they only be allowed 5%?
The reason you don’t hear it is because they aren’t charging excessive markup and they know it. They know they can’t impose a markup limit because that would penalize all business across the board. The only business they want to screw is the ”Evil business” making headlines.
If taxes are raised on oil US companies, then the extra cost of doing business (this tax) will simply be passed on to customers.
To be consistent, if we call for a special tax when oil is high, we have to call for subsidizing with tax-payer funds when oil is low, like it was for more than a decade.
Will these taxes apply to oil produced by OPEC, Russia, etc? Of course not, just American companies, which, by comparison are small compared gov-owned outfits of other countries.
What about shareholders of US oil companies which rely on company profits for retirement and investment?
This bill is class warfare, and is meant to make some feel better while not addressing the issues.
THINK people!
fT
“precipitous jump in oil prices is the rise in global demand, … demand is not currently on the rise. ”
Um..Well then that means we are RUNNING OUT. This isn’t like the old days. The prices are jumping because the “people in the know” know what is happening.
@tim
“The Republicans seem to suggest that the only way we can possibly reduce the price of gas is to ramp up supply.”
That is a nonsensical statement and I don’t think they are saying that. You can’t “make” more oil. You can’t increase supply. Avaiable fields are tapped out.
We can’t drill anything new in time.It takes YEARS.
If someone takes away your tax break the net result is you pay more in taxes. Removing the tax breaks that oil companies get is the same as increasing the tax burden the oil companies have to pay. Don’t think for a second they won’t pass the additional cost on to consumers.
According to NextBigFuture and the IEA demand for oil currently is outstripping supply by 1 million barrels per day (http://nextbigfuture.com/2008/06/updates-on-world-oil-production-and.html) Maybe demand hasn’t increased but it certainly hasn’t gone down either.
High cost of oil fuels research into alternative forms of energy. Why was no one dumping tons of money into wind and solar when gas cost $1/gallon? because there was no money to be made. Now, however, there is a lot of money to be made.
Drilling in the US won’t solve the problem either, it’s just a band-aid solution and a great way to waste our reserves of oil. I’d rather use up the rest of the world’s oil first.
I don’t take issue with the Oil companies riding an economic wave which causes their “Assets in the Ground” to increase in value. I take issue with the fact that offshore leases written in 1998 and 1999 contained a minimal royalty (because of $10/B price) without the legislated trigger mechanism to reset as the prices recovered. The result Foreign and Domestic Oil companies are pumping next to free oil from these leases and selling it back to the American taxpayer for market prices. And they want us to do the same in AMWAR.
While I am relieved that this foolish legislation was shot down, I can’t help but be disturbed by the liberal motives behind it. For many of these Democrat senators and representatives’ constituencies, there aim is not to benefit the consumer. Rather, their aim is to exacerbate the cost of oil and our economy in order to usher in a drastic change; to radically shift where we get our energy and how we use it; in a way, forcing us to “Go Green” by starving us of gasoline.
Acknowledging that the Far Left’s intentions are precise opposition to what the American economy and consumer need, let’s throw the economics textbook out of the window and realize how distorted the liberals’ fear-fueled point of view really is.
Timothy B. Hurst-
I think you touched on this, when you mentioned ” the larger political reality (or, what economists like to call “externalities”).”