Valley Firms Push California Oil Tax

isabotage3 writes, "Still smarting from California's recent enactment of emissions caps, the oil industry is confronting another assault in the Golden State — this one bankrolled in part by Silicon Valley tycoons pushing to fund conservation and alternative-energy initiatives with a tax on oil output. Slightly more than half the money raised by the Prop 87 tax would be earmarked to help cut gasoline and diesel use. Another 27 percent would be put toward alternative-energy research at California universities. The remainder would be used to help start-ups, retrain energy workers in new fields, and for administration." Oil companies claim the backers of Prop 87, some of them venture capitalists, would profit from state money flowing into the alternative-energy projects they are funding.

Comments

No on Prop 87?

[Rupan]

I live in Silicon Valley. I often hear anti-prop 87 ads on the radio and TV. One day as I was driving to work I decided to listen to the ad carefully. At the end, as required by law, they state their sponsors. They (quickly) list a number of individuals, the last 2 or 3 of which are actually oil companies. It is for this reason that I decided to look into the issue. This tax will be levied on the oil companies. They will be forbidden by the law to pass the cost on to consumers, so this will NOT raise gas prices. So, to recap: 1) oil companies have to pay their fair share to improve the environment; 2) the tax cannot be passed on to cunsumers; 3) This will benefit researchers and universities Do not be fooled by the anti-prop 87 propoganda.

Re:No on Prop 87?

[14CharUsername]

Ah, so its just like slashdot then?

Generally speaking, you're right costs usually get passed on to the consumer. Unless there are regulations prohibiting it. Of course you could say that they'll find a way. But if the oil companies charge californians more than what they charge elsewhere in the US, well its pretty obvious whats going on. And if they jerk around people too much then california can simply regulate gas prices. Which they really should do regardless, since this has been done where I live gas prices are much lower than the price the oil companies set elsewhere and yet gas stations are still making a profit. Funny how that is.

It all really depends on how much competition there is in the oil industry. You see back in the days of Rockefeller and Standard Oil they had a monopoloy on the oil industry so they could charge whatever price they wanted. But even then they found an optimal price point that maximised their profits. If they charged more than that people would drive less, use alternate forms of transportation, etc. In a free market the price is decided by the costs of production vs. demand. In a monopoly price is determined by scarcity of the product vs. demand, with the monopoly deciding the scarcity. Although in this case it may be OPEC (or the fact that we're just running out) deciding the scarcity as well.

So a tax effectively increases the cost of production. In a free market this shifts the supply curve and the price increases. But in a monopoly the price is determined by the demand and the artiificial scarcity that the monopolist creates to gain profit. Niether of these are affected by the cost of production (unless the tax is so high that it takes away all the oil companies profits, of course).

To summarise, a tax on a competitive company will be paid by the consumer while a tax on a monopolist (or oligopolist) will be paid out of the monopolist's profits.

And regulating the oil industry is relatively simple. We know the cost of crude oil, we know the cost of refining it. It's very simple to calculate what the cost of gasoline should be.

Re:Follow the money

[BluedemonX]

There was no "less" on the end of his statement.

Bush has been spending freely like there's no tomorrow. No war, corporate perk or handout to the rich that can't be put on the credit card for others to pay later. While cutting taxes for the top 1%.

Re:This oughta be interesting

[rubycodez]

anyone could buy it and then resell it in california, just raises the price a tad

Is this the best we could do?

[Random Utinni]

When the issue is a California proposition, the best article we could find to link to was from the "Northwest Florida Daily News"??? Huh?

Here are some more local sources that might be useful in the debate... and yes, the critical sites do raise the same point... from within California.

(Neutral)
Secretary of State's Analysis

(Critical)
Local Blogger
Official "No" Site

(Favorable)
Official "Yes" Site

Re:This oughta be interesting

[nelsonal]

The tax is on extraction of oil not sales of oil, California remains one of the larger oil extraction states in the Union. The fungible nature of oil means it's terribly difficult to actually harm someone by boycotting in either direction (it's pretty cheap to ship oil even a long distance so if for example California producers stop selling to California consumers the roughly 1 million barrels of oil extracted in California would just go from California to say Oregon, Washington, Nevada and Arizona while oil would be imported from Venezuela. Extra shipping costs would probably be about $2 per barrel (or about $0.05/gallon of gas/heating oil). Good for the shippers of oil (pipelines and boats), small losses for producers and consumers of oil.

Re:Money flowing

[phantomlord]

how come whenever anyone proposes stuff like net neutrality or alternative fuels the conservatives say "the free market will take care of it"?

I'm a conservative in the strict Constitutionalist sense of the word. I think limited regulation is good but too much regulation or no regulation is harmful.

I see net neutrality as a solution in search of a problem. Some ISPs are out there threatening to charge the Googles of the world extra fees for carrying their data, throttling VOIP so it can't compete with their service as well, etc so people here at Slashdot are in a tizzy that something needs to be done to regulate it. That's the wrong attitude because it instantly assumes that the customers are completely powerless and can exert no force on the markets themselves. The minute popular sites like google get throttled, customers will be all over their ISPs complaining about how things don't work right and that if it doesn't get fixed, they're leaving for a competitor who won't engage in such practices. If every provider in the area engages in such things, someone will step in and change that if the customers rattle their cages loud enough. They could build a co-op, threaten to terminate utilities monopoly rights to the roadsides unless they comply, etc.

Legislation is the last step to try, not the first. Government is rarely the solution to problems because it is the largest tool you have and it WILL affect things in unforseen ways. Net neutrality gets implemented and suddenly, ISPs can't setup a low latency path to popular game servers to improve their customer's gameplay, they can't cache large popular files with a proxy, etc. Depending on the language of the bill, they might not even be able to peer with a larger network with faster pipes than a smaller network. There are tons of unforseen consequences in such broad legislation and you take a huge risk that you're going to make things worse... and good luck on fixing it after one bill has already been passed, it might take decades.

All that said, just up the thread here, people asked why conservatives think we have a free market economy. We don't think we have a free market economy. LOTS of us regular joe fiscal conservatives believe that the amount of regulation and taxation is EXTREMELY out of control though. Personally, I want to see the federal government reduced to what it's legally allowed to do under the Constitution (ie, handle interstate commerce and foreign relations (including military) and that's about it) and a lot of conservatives would agree, even many who are trying to get into office for the first time. However, once you're actually in office, your idealism all fades away as you realize you have no hope of changing anything because if you refuse to take pork for your district to set an example, the money will just get spent somewhere else and your opponent will accuse you of not bringing home the bacon. Try to reduce the federal entitlement programs (which are ALL ENTIRELY Unconstitutional IMO) and you get demogogued about wanting to starve children and old people, throw people out into the streets, etc. The longer you stay a part of that system, you will eventually lose faith that you can push your ideals into action.

In fact, that is one of the reasons why it was a HORRIBLE idea to make Senators popularly elected instead of chosen by state governments. It's the United STATES of America and the Senators were there to push for the interest of the states instead of being beholden to the immediate interests of the people. The Senate was once the chamber of esteem and statesmenship but today, it's more raucous than the house because usually a Senator has to pander to a significantly larger group of people and often, will only play up to the major population centers while ignoring the rest of the state. Here in NY, most of the state is actually fairly conservative - you'd think we were a midwest state but New York City dominates the state's politics on every level and instead of having a balance

Re:I call BS

[rahvin112]

BP, formarly british petroluem is one of the largest if not the largest suppliers of Solar Panels on the planet. Most of the oil companies have their little branch of alternative energy that they explore.