According to Obama's website he will "Enact a windfall profits tax on excessive oil company profits".
Economics 101 says if you tax something you get less of it. By implementing a windfall tax oil producers will have less incentive to produce oil in the United States. Which will lower the domestic supply of oil leading to an INCREASED dependence on foreign oil. The opposite of what needs to happen. If he is serious about reducing the U.S. dependence on foreign oil he would provide tax cuts to big oil but that isn't politically correct is it?
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Oil companies.... come on down to Alberta and Saskatchewan! Lower taxes and we say, drill baby, drill!!
What will Obama do when American companies move their head offices to Canada?
Economics 101 says...
Ummm, no it doesn't. You're describing a very simple supply curve that is a bijective function, like a quadratic. How do you know that the supply curve for oil is like that? How do you know it's not a backwards supply curve? As far as I know, and I've actually asked my investment broker about oil markets, the supply curve for oil is not the typical curve that you are implying. Further, the relationship is incredibly complex, multivariate, and contextual.
David, you are a funny man. You throw out a lot of big words but given your incoherent sentences I doubt you actually know the meaning of these words.
First off, yes, if you tax something you get less of it. For example income tax. When income taxes go up people find ways to hide or shelter their income to reduce their income taxes. Reported incomes are actually lower when income taxes are higher.
Your first mistake is asking your investment broker for advice on oil markets. Nothing against investment brokers but they are not trained to analyze oil markets. I talk with investment brokers quite often and am shocked by their overall lack of knowledge on oil markets. My advice to you is to find better source for information regarding oil markets.
What does the supply curve of oil have to do with tax jurisdictions? My only mention of the supply of oil was where it was originating from not the aggregate quantity of supply. The U.S. will become more dependent on foreign oil as domestic production will be shifted from the U.S. to foreign jurisdictions.
An example of this is in Alberta the government recently increased the royalty rate. The result has been a massive outflow of investment from Alberta to neighboring provinces and local companies are now looking to move international.
The relationship is not "incredibly complex, multivariate, and contextual" as you state but rather fairly straight forward. Try not to over complicate the issue and you will find it much easier to comprehend.
Thanks for your comments despite their lacking any intellectual depth. It is good to know you find my posts interesting to read.
Please provide me the mathematical model then. I await the single variable bijective supply curve.
By the way, I would be careful about making assumptions about what I do or do not know. If you find my sentences incoherent, perhaps you don't understand what I'm talking about. Maybe asking for clarification on a particular point might be a better idea. Do you know what a bijective function is? Is that where you got confused?
My investment adviser answered a question that I asked about the influence of demand on the price of oil. He may not be an economist steeped in the oil market, but he sure has more insight into its day to day maneuvering than I do. His answer didn't FORM my opinion, but it did INFORM it. My opinion is FORMED from the mathematical models, of which the very BASIC supply curve you imply is questionable here.
Are you trying to actually convince me that the supply curve is not better represented by a multivariate function?
Your simple-minded analysis may or may not be true, for some commodities, at a given time, and for a given level of taxation. It may also be true asymptotically. But it is not necessarily true for the oil markets, here and now.
If you really believe that you have the simple answer to the oil market supply curve, then by all means get publishing. I think you might find that real intellectuals publishing in real, scientific economic journals would disagree vehemently with you.
Try not to over complicate the issue and you will find it much easier to comprehend.
Unfortunately, sometimes models ARE complex, because simplified models are wrong, and don't capture the dynamics of the system properly.
Thanks for your comments despite their lacking any intellectual depth.
No problem. I'm truly sorry that I can't live up to your definition of intellectual depth. What is your definition anyway? I should like to strive to meet your expectations, as high as they surely are.
David...it appears to me that we are talking over each other. I agree with you that the supply curve is a function of multiple variables, I have never argued otherwise. We are in agreement on that.
My whole point from the beginning was that the source of the supply will shift (not the amount of supply). As taxes are increased in one country the oil companies will shift to a lower cost country to procure their supply of oil. As I mentioned, we are seeing this happen today in Alberta.
The issue is that as companies look outside of the U.S. they will be driven to countries that are not friendly sources of oil. This will increase the U.S. dependence on foreign oil which Obama has stated he is trying to avoid. Point being, he is actually hurting his own cause with unintended consequences of a windfall profits tax.
I see. You're operating under the assumption, then, that we should give domestic oil companies whatever they want to keep them buying domestic oil, even as they see quarter after quarter with record profits, and as the domestic economy is tanking.
Running a country costs money, and that money comes from taxes. If they are too high, they can be stifling on the economy. But cutting taxes and running the levels of deficits that the Bush administration did is abysmally stupid, and raising taxes on oil companies may or may not cause a proportion of them to shift overseas for supplies. There isn't enough domestic supply, and some overseas supply is necessary in the best of cases. What is the best of cases for you, while we're on the topic? Drill in ANWR or wherever else, and cut taxes further?
David...you are reading into my words. I did not assume anything. The purpose of my post was to point out the fact that the windfall profits tax will have a negative impact on domestic oil production, which contradicts Obama's desire to reduce dependence on foreign oil. You can't have it both ways.
I have not suggested cutting taxes to oil companies. Why do we need to change the current taxation of oil companies? As oil companies are making record profits they are also paying record levels of taxes. In fact, they currently pay MORE in taxes than they keep in profits.
http://mjperry.blogspot.com/2008/11/us-oil-companies-paid-collected-more-in.html
The best case for me depends on your desired objective. Reducing dependence on foreign oil is not a huge priority for me but it is for Obama. I would focus on the economy and the worst thing to do is to raise taxes on anyone.
Since you mentioned ANWR, yes I think we should drill there. I have not heard a single rational argument why we shouldn't drill there. ANWR has become symbolic to the Left of the greedy desires of "big oil". ANWR is no different than drilling in Texas or the GOM.
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