Saturday, May 03, 2008

Candidates consider new taxes on oil companies; Hillary wants ExxonMobil et al to pay your gas taxes this summer

Today, Hillary Clinton, on the Indiana primary campaign trail, suggested that oil companies be forced to pay consumer gasoline taxes this summer. Sounds like expropriation, doesn’t it! She also wants to regulate energy trading, and brings up Enron as an example of past abuse. She says that the market price for oil should be less than $100 a barrel, but it has been driven up by commodity speculation. True.

As we know, John McCain had suggested a gas tax holiday for the peak summer driving months, probably not too effective; Barack Obama repudiated that idea but, in the same spirit as Hillary, wants an oil company windfall profits tax. Obama called oil prices a "shell game." Richard Nixon had suggested that back in early 1974, before his unraveling with Watergate.

ExxonMobil is trading in the upper part of its range after announcing record profits, but naturally investors are going to fret about the prospect of new taxes, and wonder if they should sell now. Steve Mufson has a story in the Friday May 2 front page Washington Post, “Up $10.9 Billion, Exxon Worries About New Tax,” link here. The story is here.
Exxon’s earnings depend on a lot of things, including refinery operations, which are not necessarily doing as well, and government policies overseas, especially Venezuela now, as well as unrest in Nigeria. The boost in oil prices does not increase profits in a linear manner.

Exxon's first quarter results are here.

Individual investors who did invest in oil and gas decades ago seem to have done very well. Is this "wealth without work", as the Left claims?

Picture: Three Mile Island nuclear power plant, near Harrisburg, PA, site of an accident in 1979.

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