I don’t quite follow how taxing oil production will lead to a decrease of 25% in oil and gasoline demand. The users will see no difference in price, if the clause not allowing the tax to be passed through to the consumer is workable, and thus no reason to reduce consumption or switch to an alternate. The subsidied alternates may provide some incentive.
Why not just tax the consumer through petrol duty and pass those tax revenue bucks (comments above on the way california taxs are handled notwithstanding) to subsidies alternate uses and, god forbid, build some decent public transport infrastructure. Thus the user see a doubling effect , their curent fuel price is higher than starting point and the alternate is lower than its starting point thus the consumer demand to switch fuel source and reduce consumption is enhanced.
On the sneeking in here and there of a penny increase in petrol prices just because they can, I doubt this is the case. The usual volume sales driven profit margin and requirements for cash flow have in the past demonstarted that one petrol station is always prepared not to pass on that 1c rise and thus get a little more business and a few morepeople buying items in the gas station store at a healthy markup. It would require a coordinated approach to raise the price, which is possibly illegal and difficult to implement as it is my understanding many petrol station out lets are run as a franchise and as such , big oil HQ cannot exert direct pricing over the outlets. Add to that, it is my experience that the oil majors really trust each other less than two people or organisation who don’t trust each other a whole heap, coordination in priceing for petrol, unlikely.
As for taxing the production of oil at a higher rate based on the price per bbl, no reason not to do so, it’s the states and california voters rights to set what ever business financial regime they see fit to do so. I would wonder if the tax would really be effective as it would not be a huge issue for companies (barring small independents) to switch investment in production (approx 260 million bbls produced total 2005) and drilling operations to other states or outside the country thus lowering the production in state (or not letting it increase as may be required). The prooven reserves stay in the ground in Californa thus not affecting the oil co valuation, oil is produced elsewhere, petrol is sold, the great big cash register continues to ring.
On the political adverts (I have not seen any, just going on the OP example) it may be a little disingenuous to suggest that ‘it is time for oil co to start paying their share’. The 78billion are profits on worldwide income, so royalties, taxes national petroleum fund contributions etc have all been paid in the respective countries where oil was produed or petrol/petrochemical prodcut sold. If the 78billion is post tax then the US protion of tax has also already been paid as well, all of which is a chunk of change some share as been made, but it never hurts to ask for a bit more I suppose. Incidentally at current prodcution rates in california and assuming 70$ a bbl and 6% tax on gross cost that 1billion a year, I assume the 4 billion is across several years. As for oil cos claiming they need the money for new exploration, i would imagine that they have sunk as much money as they can into their exploration budgets now to get as much cash out of the profit line as possible. Many countries allow a tax break on cost associated with exploration, so better to use this up than have it appear as profit andlet terry the tax man have a bigger nibble.
Anyone still here?
In short - dont see the tax doing anything to drive down petrol demand, it may well drive down oil production in california. Anything in a political advertising is very likely to be a mild exageration and a possible misrepresentation, you don’t say…
