Obama's Proposed "Windfall Profits Tax"

Frustrated Voter,

A million thanks for enlightening me and others. A standing ovation for your analysis.

Lets be frank here. Is it possible even in the long run to close US doors to Oil from the Middle East? My answer is an Emphatic NO!

If we drill to bring down the price of gas, it would only suffice for the short term. Surtax on Excess Profit will increase disposable income in the short term too.

Resort to biofuel will mean less grains for the growing world population to consume.

Would People rather starve so that they can turn their backs on foreign Oil? The answer is an emphatic NO too.

Will increase in Supply be the solution, it should. But this is largely dependent on the Oil Cartels - OPEC, Saudi Arabia, Iraq, Iran etc to increase Production and create a glut in the World Oil Market.

A glut, of course will not favor the Oil Producers as it will drive down the prices of Oil, lower their Gross National Income, create storage problem with attendant cost of storage, affect the Economy, since Oil is the major FX earner of these Countries.

Production will only be increased to meet demand. These countries don't anticipate demand.

America currently has a balance of payment deficit with some of these Countries
and the US in no longer treated as the beautiful bride it used to be before 2000.

Allowing the Oil Companies to drill off-shore Oil will only be a drop of water in the Ocean as the US may not fully benefit from it. The Oil Companies are at liberty to sell to any buyer provided adequate Royalties are paid to the Government.

The Oil Companies are not charitable Organizations. They are in business to maximize Returns on Capital Invested.

So what can be done to lower Oil prices:

1. End the War in Iraq
2. Mid-wife Peace in the Middle East and the Niger Delta.
3. Agree to a compromise with Iran, no grandstanding here.
4. Embark on research for crude oil substitute other than biofuel which will create food crisis in the world.
4. Inflate your tires properly, tune up your cars to conserve fuel.

It is interesting that so many of you are in favor of the windfall profits tax. But are you aware that Congress already tried a windfall profits tax on the oil companies from 1980-1988. When that windfall profits tax was implemented it was projected that the government would take in $393 billion in additional revenue. Instead all it got was $80 billion in additional revenue over that 7 year period. BUT during that period U. S. domestic production of oil dropped between 1.2% and 4.8%. And our dependency on foreign oil increased.

And this new windfall profits tax will have the same result. Less production, higher prices and even more dependency on foreign oil.

What Sen. Obama and the Democrats are proposing is nothing more than attempting to buy your vote with the oil companies' profits. Is this the "change" that you really want?

For the record, for those who are advocating biodiesel, there are certain facts that you need to know. First, it can only be produced from plant oils, not cellulose or starches/sugars. Cellulosic biomass is highly abundant, but not convertible to ethanol. Two, biodiesel has a shorter shelf-life and it cannot be stored long enough and this increases the costs. Three - it cannot be pipelined so its transporatation costs are much higher. Ethanol is the so-called dream fuel, right? Wrong. To grow corn, you need to make fertilizer from crude oil (need to make ammonia, which comes from a reaction of hydrogen and nitrogen, and hydrogen has to come from hydrocarbons). The part of corn that is useful for ethanol is the sugar/starch portion, namely the portion that is in our food. Both biodiesel and ethanol (doesn't matter what produces the ethanol) suffer from the problem of oxygenation. It has a lower energy density so you will burn more of it to get the performance by a lower volume of gasoline or diesel. Ethanol cannot be pipelined! It attracts water and causes pipelines to corrode. So it can only be shipped by rail cars and tankers. That increases the costs substantially. All of these so-called alternatives cannot be made in the volumes that we are going to need in the near future. Both biodiesel and ethanol production will ultimately require a lot of water to process. This can't be done anywhere. These are the issues that need to be discussed. None of this "10-year" period that will be wean off of oil. There are so many problems to deal with that only in 10-years time will we only be able to define them all and get started. I'm not pro-oil, but pro-common sense. We already have the sunken capital to convert oil to gasoline, plus we have the know-how from years and years of experience on how to build and operate refineries. Without energy, our economy is doomed. We need a balanced approach, but the harsh truth is that we need oil for today, tomorrow, and for the foreseeable future.

"That said, there is no short term method to lower gas prices--including the "drill now, pay less" nonsense."

Nonsense? The fact that the storm bypassed the Gulf of Mexico oil rigs dropped the price of a barrel by over three dollars. Bush lifting the executive ban dropped the price.

Be factual, Chris or prove we folks in Bama just ain't that smart. The current short term prices are based on speculation not consumption. While I agree that the long term prospects mean we have to drill and we have to find alternatives (remember, this isn't just about price, it is also about emissions and the climate), your position and that of Obama puts the whip to the back of the Americans with permanent high price shocks rather than taking the air out of the manipulators tires.

Forcing high prices on the Americans before supply and demand does is not a winning strategy in November unless you blame McCain for it and people buy that. Neat strategy but transparent.

ChrisNBama - If I were a shareholder of oil stocks and BHO gets his windfall profits tax in, I would abandon that company in a heartbeat. Why? Because I've invested in the company for a return for my investors, namely you and your neighbors who hold bonds (401k, retirement, pensions). The oil companies to survive, won't sell you the fuel. They will relocate and incorporate in a different country - a country that has promised them that there will not be a windfall profits tax. You can kiss all of those US jobs goodbye. The only thing you have is BHO's hot air to fill your tires. It will be time to haul out the horse and buggy. If you are desperate enough to drive, you can buy imported gasoline from a company that had once been in the US. At that point, you will pay through the nose. This is the example of a level of arrogance from a neophyte who doesn't know when to shutup and just spout the populist rhetoric to get elected. People are under the impression that these "big oil" companies are just cash machines. If you want a solution, you're better off voting for someone who knows something about how the free market operates and what one can do to influence it. BHO's ideas are not new, it's called socialism.

Oil is IT for the foreseeable future.

That remains a FACT.

It is only good sense to keep billions of dollars in the US rather than send it out.

Liberals always make it sounds as though ONLY the US would be out in the waters drilling.

We're the only ones NOT there.

It's ridiculous.

For you too, Chris

Posted by: drjohn | Aug 5, 2008 9:23:02 AM

I have been posting this for months, and have several letters to the editor.

The difference between usis that I know government cannot get this done. I also know Obama wants to use a stick and that won't work either. A carrot is needed.

Obama wants a "clean enery nation." Wonderful, but without substance he sounds like a Miss America contestant. I want world peace too, but if wishes were horses, beggars would ride.

"How are you going to regulate the world market?

Please, let's hear it.

What it CAN do is allow for more supply. That is the most effective method of lowering prices.

Always has been."

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Of course we can't regulate world markets. We have a certain influence, but not that great.

That said, there is no short term method to lower gas prices--including the "drill now, pay less" nonsense.

The only solution is to ween ourselves off oil, through alternatives. Which Obama is proposing, a sort of Manhattan Project to end the age of oil, at least foreign oil sources within 10 years.

McCain's big idea is to drill more domestically. We sit on 3% of world supplies and we consume 25% of the world's oil. India and China are exponentially growing an appetite for the black stuff, and demand is vastly outpacing supply.

It is of a paramount national security interest, that we take drastic measures to inculcate our selves from this coming disaster.

Obama offers that vision, McCain offers more of the same.

Rodney

Here's another

"If you combine the rising cost of fuel, with the potentially rising cost of corn, we could see grocery prices climbing higher, at a time when many families are already facing lay-offs, downsizing and mortgage foreclosures."

I know all about biodiesel.

It can be made in a cellulosic process, and that's what you're really trying to say, but there's just not enough stuff around.

BTW, Jake, you never did get an answer as to what a "windfall profit" is.

I doubt I am surprising you! ;-)

DRJOHN
YOU HAVE A LOT TO SAY BUT WILL NOT DO THE RESEARCH WHAT I HAVE STATED IS FACTS NOT SOME REPUB BS we need to start now TO HELL WITH CHINA AND INDIA THEY HAVE A GROWING PROBLEM OF THEIR OWN AND THE USA IS WHAT IS IMPORTANT TO ME ---WHAT ABOUT YOU
GOODBY

"DRJOHN
DO THE RESEARCH BIODIESEL HAS NO DOWNSIDE---as what is left is high quality cattle feed--a boost to food supply----farmers have been doing this for 40 years that i am aware of."

Rodney

You have to start calculating what you need in land and in water.

Growing crops for fuel shuts out crops for food. It is a simple thing.

Here:

Corn biofuel 'dangerously oversold' as green energy

http://environment.newscientist.com/article/dn12283-corn-biofuel-dangerously-oversold-as-green-energy.html

I have many more.

got to go guys
please do the research on biodiesel to start with----YOU WILL GET AN EYEOPENER.

"IN APPROX 10 TO 20 YEARS IF AROUND AND NOTHING IS CHANGED YOU WILL LEARN A VERY HARD LESSON."

I don't think so. We have easily more than 300 years of oil.

Nonetheless, I am all for alternatives. I have already called for incentivizing ownership of electic cars and a Manhattan project for fuel cells.

But nothing gets cleaner until China and India are on board and that's not going to happen in your lifetime.

DRJOHN
DO THE RESEARCH BIODIESEL HAS NO DOWNSIDE---as what is left is high quality cattle feed--a boost to food supply----farmers have been doing this for 40 years that i am aware of.

Who is going to end up paying that windfalltax in the end?

in the 70 we had an oil embargo---and now we are paying for not doing something about it then-----try making your own alternate fuel --AND FIND OUT WHAT THE GOVERNMENT DOES TO YOU. dont take my word for anything--DO THE RESEARCH SOME OF YOU ARE SUPER AT IT,HELP PUT AN END TO THE MESS AND STOP BEING USED.

"I'm not suggesting that our government federalize the energy sector, but by God it has a right to regulate it, and when necessary, intervene to help consumers who are victimized by circumstances beyond their control."

How are you going to regulate the world market?

Please, let's hear it.

What it CAN do is allow for more supply. That is the most effective method of lowering prices.

Always has been.

"DRJOHN
YOU NEED TO DO SOME RESEARCH-----biodiesel"

Rodney

Growing crops for fuel makes food compete with fuel, meaning less food for poor people. It's already happening.

Is that what you want?

It also places a severe strain on the fresh water supply.

Is that what you want?