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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.
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.
Shocking! Because I'm sure that the oil industry never profits from any legislation that they push, right? Why is it surprising (or wrong) that people are pushing bills that help them?
Yeah, except california is a big state. They wouldn't stop selling gas there if it meant the gas was being used to burn babies alive, they'd still sell because it's such a big market.
While I definitely like the idea of strongly encouraging less oil consumption and less driving, the Libertarian in me says the government should stay out of it. If there's a profit to be made in alternative energy, someone will do it. More importantly, private business can do it a hell of a lot better than the government could hope to, and the free market will select a better winner than the government can.
One of these days, I'm gonna finally move myself out of the Socialist Republic of California...
This is just an attempt at the 'blame game' to punish oil companies and help California seem more 'progressive'. While they're at it why don't they tax Coca Cola so that we can find soda-alternative drinks! Or maybe tax Silicon Valley itself a little higher to fund research into alternative computing?
There are no trails. There are no trees out here.
"I use a Mac because I'm just better than you are."
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.
Announcement: The Laws of Economics have been suspended in California. Yes, Viriginia, there is such a thing as a Free Lunch!
The prop, if you've summarized it adequately, does not go far enough if its goal is to reduce emissions and promote a cleaner environment. It fails to reduce the actual fuel consumption at the pump by omitting the two things that would actually make a difference. First, it does not allow the tax to be transferred to consumers. Second, it does not levy a tax against gasoline consumers. The cost of gas must increase if you expect to see an impact in fuel consumption. It must be a bottom-up plan that forces consumers to consider alternative forms of transportation. A simple top-down plan that attempts to replace current transportation with cleaner forms will not succeed because there is no incentive for people to make the switch away from their current mode of transportation.
It's a bad law. Not because it goes too far, but because it does not go far enough to achieve its stated goals. Additionally, it attempts to manage the marketplace in an unnatural way which is bound to lead to some strangeness later on.
So, you think it is ethical to tax people (take money by force) to hand it over to private entities, for political purposes, while not actually having to provide anything useful, while knowing that the results of the research will not be free (as in beer)?
Or is it just that you think Oil Companies are evil and anyone opposing them is good? Last time I checked, the Government made more on Oil Taxes than the Oil Companies made in profits.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
A far more productive activity with respect to reducing fuel usage that would not involve California creating yet another destructive tax would be to allow high density development in places like Silicon Valley. It is the height of stupidity that the same political class that wants everyone off the roads and/or to take public transportation adamantly refuses to allow the high density construction that would make it feasible. Far more fuel use reduction could be obtained by simply letting developers turn the vast suburban sprawl of places like Silicon Valley into an urban environment, but apparently this offends their sense of aesthetics.
If they were serious, they would start with the absurdly contradictory positions of city planners rather than inventing a new tax that will invariably get pissed away with no obvious benefit.
My memory is fuzzy, but I think one of the initiatives meant to encourage alternative-fuel R&D was a big subsidy for that industry. This gets added to our tax bill alongside the giant subsidies to the oil industry.
I don't get it. If you want to level the playing field, why not retract the fossil fuel subsidies?
On a sidenote: do conservatives really think the US has a "free market" when all this govt. money is being pumped into damn near every industry?
My turnips listen for the soft cry of your love
I live in the Bay Area, and Prop 87 sounds great in theory, but I'm pretty skeptical about the part of the costs not being passed on to consumers by law. How specifically is that supposed to be prevented? I find it hard to believe that it's really possible but I don't know much about the specifics.
Tax a business, their costs increase, they pass that charge onto their customers. If you are going to tax it, tax it at the pump so everyone knows about it. Provide tax relief for people who will be impacted, and get on with it.
Know why gas went to $3/gal in the US?? Because PEOPLE WERE WILLING TO PAY IT. They griped, they whined, they complained, but everyone still went down to the gas station once or twice a week and filled up. Don't believe me?? Why do people pay 5 cents more a gallon for gas when they could go across the street and get it for less?? Or 20 cents when they could drive 5 miles and get it for less?? Because they can. Oh, they'll whine about the cost, and then they'll eat Kraft Macaroni and Cheese one night a week instead of spending $25 for pizza for the family to make up for it.
My heart goes out for the minority that can't afford it, but businesses are in business to make money, not provide charity work. The funniest thing I heard was someone whining about Exxon's record profits. I didn't hear anyone offering to give them money several years ago when their profits were in the crapper.
My daughter, bless her heart, wanted a new car. She went out and bought a Yaris and now gets 40MPG. Toyota can't keep them on the lot. I bought a motorcycle a year ago and get 50MPG, so there are already means to reduce consumption.
As for those 'cheaper alternatives', where are they. Ethonal?? I've read mixed reviews, some claiming it's the answer to everything, some claiming that the resulting agribusiness pollution might be worse than what comes out of our tailpipes now. Hybrid cars?? First, they cost more. Maybe their effective MPG makes up for some of it, but the anlysis I've seen says they are still more expensive in the long run once you start swapping out batteries. Biodiesel?? There is only so much french fry oil in the country.
My fellow citizens of the USA have it easy -- just look at the price of gas around the world. This is one of the cheapest places to by it.
And we still whine....
I rarely read replies, it's my opinion and if you thought about your opinion a little more, I'm OK with that.
The Fat Cats want the consumer to have as much excess money as possible to buy more of his product. The Nanny State wants the consumer to have the minimal amount of money possible to not revolt.
Ideally, you want to maximise your return on as little product as possible, that way you don't run out of your money making stock. Doubled the price, gasoline still sold in large quantities. I work in California and am shocked how many people won't pay $180 for annual school bus fare, but will happily join the morning grid-lock to transport their kids and burn through a few $ of fuel per day.
A feeling of having made the same mistake before: Deja Foobar
I prefer the "u" in honour as it seems to be missing these days.
Increased costs are always passed on to consumers. If oil production becomes less profitable, supply is reduced, and, guess what, the price goes up. You can't legislate pricing without inducing shortages (or, alternatively, in the case of price supports, creating surpluses). Anyone here remember gasoline rationing? Was your license plate even or odd?
You do realize that more people have died in California Car Accidents than US soldiers in Iraq War, during the same time frame, right?
And while you're on the subject, how much money is not being a Muslim or dead worth to you? Or perhaps we should be like Chamberlain and bring back a piece of paper stating Hitler will not invade.
While I have my problems with Bush, I don't see the democrats offering anything worth considering except "we're not Bush". They could be worse than Bush, it is possible, you know.
Agent K: A *person* is smart. People are dumb, stupid, panicky animals, and you know it.
Forcible transfer of wealth from the citizens to the wealthy and the corporate elite = the American way
Transfer of wealth, forcible or market-aggravated, from the wealthy and corporate elite to the citizens = godless communism = bad, bad thing.
[neo con parody off]
--- Grow a pair, liberals... stop letting the Republicans bully you!
Why shouldn't we cut taxes for the top 1%, as long as we are cutting them for everyone? In fact, everyone who actually pays taxes got a tax cut-- and the people on the bottom got the biggest percentage, so it was still good ol' socialism at work. But you probably couldn't know that because all the media ever reports is "tax breaks for the rich."
Gamingmuseum.com: Give your 3D accelerator a rest.
Which is why I suggested the tax at the pump where the consumer is most directly exposed to the tax. In California, the gas tax is already sky high. Raising it further will have an effect, even if it is only in that people take less long drives or drive more gas-consciously. You can't expect everyone to drop everything and buy a new Prius just because the gas prices went up. But you can expect them to use the gas more carefully than if they were paying 99 cents a gallon for it.
It is from the decrease in gas usage that you will see the biggest pollution delta. Since the goal is to reduce emissions and promote Earth-friendly technologies, they have already made the decision that they value the environment over their economy (or at least moved the environment up the ladder of priorities).
If they want to reach their goal, they need to change people's behaviors. There are millions of individuals whose cumulative effect is greater than that of the all the oil companies combined. If you could get them to reduce their driving by a couple percent, you'd gain a much greater benefit than if you got only a tiny fraction of them into eco-friendly cars.
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.
This just in: people who support proposed law think they somehow stand to benefit from said law. Film at 11.
Saying "yeah, of course YOU like that, it does good things for YOU!" is no argument against anything. You need to show that it also does bad things for someone else (or in the case of something tax-funded, where there's the automatic bad thing of costing us money, you need to show that it provides insufficient public benefit).
This is no more interesting than saying "Rich folk claim that welfare supporters, many of them poor, stand to benefit from such laws". Of COURSE they do. The question to the rest of us is, do WE benefit from THEIR benefit? If these VCs make money off of projects they fund which also benefit the rest of us, where's the loss?
-Forrest Cameranesi, Geek of all Trades
"I am Sam. Sam I am. I do not like trolls, flames, or spam."
Although I guess it would be hilarious for Unocal (Chevron, whatever) to stop selling oil in California.
Yes, this legislation would reduce the profitability of selling oil in California, but it would still be profitable. Prices might go up (even though they say they will not go up), but it wouldn't mean there'd be no oil imported to California. If the legislation actually has some way to fix prices, and there are shortages nationally, then maybe this could make the shortages focus in CA. I guess. We'd need someone who understood both this bill + world oil economics to tell us, though.
There are no trails. There are no trees out here.
More importantly, private business can do it a hell of a lot better than the government could hope to, and the free market will select a better winner than the government can.
You have proof? Or is this just a statement of fact where no proof exists?
There is no such thing as a free market. It's like Santa Claus, or the tooth fairy, or WMDs in Iraq. There are always people who control the landscape of the market, whether it is the big boys (AT&T, Microsoft, oil cartels, etc) or the government (often the proxy for the big boys). Whether market dominance is long term or transient, the affect on the market is detrimental and permanent, and never in favor of the individual citizen.
I'm not defending the government, because it is usually filled with people who are unfit to govern. I'm just saying, putting your trust in the free market is like walking into a seedy Mexican bar where known organ harvesters hang out saying, "Yessiree, I just got the results of my medical exam, and I have perfect kidneys, and a beautiful purple-grey healthy liver. Yep. I have great body parts."
As far as stuff like alternative energy sources go, there's no money to be made until those sources have been found, developed, and made economical vis-a-vis petroleum. And believe it or not, many modern advances have come because of government investment in research. I'd go so far to suggest that government research has resulted in more economic health than private research.
Consider the internet as a prime example.
What was the "free market" doing? The participants were fighting amongst themselves, and not advancing anything at all like the internet. We had IPX/SPX, NetBEUI/NetBIOS, yadda-yadda-yadda. It took substantial (though not massive) government funding to provide us with a simple, resilient, adaptable protocol suite, and the infrastructure to make it useful. If we were stuck with the "free market," we'd all be using MSN dialup right now, except the oldtimers, who'd be using AOL (who would've purchased everyone else).
The free market has shown itself to be a fiction. When you pull the curtain back, you won't find a kindly, slightly-bewildered gentleman. You'll find the hideous faces of the corporate monsters who will offer you no alternative but their alternative. When they are mighty, they will eat the smaller competition who might possibly challenge them someday. They will purchase protection from the government where they can, as if it is the government's duty to protect them from their customers.
I don't believe the government should meddle in everything. But I don't think we should leave something as important as our future in the hands of corporations, either.
Microsoft is to software what Budweiser is to beer.
Which is why I am completely in favor of California raising its gas prices to pay for research into alternatives.
It can't be prevented, any more than water can be made to flow uphill.
Here's one guess as to how it will shake out: Prop 87 passes, because Californians are generically such fools as to routinely believe they can get something for nothing, if a majority votes in favor of it. This makes extracting and selling oil in California less profitable than doing so in Texas or the Gulf of Mexico. Therefore, oil companies with multi-state operations -- which is to say all of the big ones -- will reduce their business in California and increase it in other states. The reduced supply of gasoline will, quite naturally, drive up the price. Zap, the tax has now been paid for by the consumer, as it always is.
Can this be prevented by even more legislation? Of course not. So long as California cannot change the rules of doing business in other states, the most it can ever do, while pursuing the fool's gold of squeezing money out of those damn "rich" corporations, is impoverish itself by driving successful business to other states.
This observation is a basic fact of the free market.
What this fact does not tell you is what the manifestations of adaption are. The manifestations depend largely on the rate at which scarcity develops. Consider two extreme scenarios: gradual scarcity and sudden, massive scarcity.
In the first scenario, oil dries up slowly. There is plenty of time for everyone to adapt. One possibility is finding an alternative to oil. Another possibility is that if no alternative to oil is found, then life becomes too expensive to live, and the population will very gradually decline to a level that existing supplies of oil can support. (Note that fertilizer is derived from oil.) Everyone is happy.
In the second scenario, oil dries up suddenly. It disappears after 1 week, counting from today. One week after the disappearance of oil, starvation will be widespread in the West as the transportation and the farming system stop working. Bacteria and fungal infections will run rampant as the technology powered by energy derived from oil grinds to a halt. The population declines by 50% after 6 months.
The question is which scenario best matches the scarcity rate of oil. Many geologists suggest the first, optimistic scenario. However, these geologists are basing their guess on a world where only the West is consuming oil.
In the future, half of the planet will be consuming oil at a high rate. We are moving quickly to the second scenario. The free market does indeed work in both scenarios, but the second scenario is excruciatingly painful.
As I understand it, the proposition will tax oil taken out of the ground from within California. Oil from within California will now be more expensive. The oil companies will then buy more oil from Alaska or Venezuela and pay the cost of shipping the oil to California. The oil companies may not be allowed to pass on the cost of the tax directly to the consumer, but they will pass on the cost of transporting oil from greater distances. The price of gas will go up, make no mistake about it.
We should all pay for it. Somehow, this world has become so short-sighted, in-the-moment, materialistic, and irresponsible, that we have this aversion to making some sacrifices that benefit humankind as a whole.
Yeah yeah, communism blah blah, capitalism blah blah. What the hell is wrong with getting rid of oil? BEGONE! What's wrong with investing - heavily, I might add - in cleaner fuels?
Even if - and this "if" is pretty weak - there is no global warming, there is certainly high mercury levels in our oceans, polution in our oceans, rivers and wells, toxic chemicals in our computers, drinking water, meat, vegetables, etc. Being "green" seems to have taken on the conotation of only being about global warming - but it's so very much more.
We know that a lot of what we do as a people pollutes the earth. Even if it doesn't cause global warming, the dense brown layer of air the airplane flies into coming into LA or NY or even Philadelphia airports are disgusting.
We can have almost everything we have now, and in a greener, cleaner fashion. But gross consumerism and selfishness has us so completely stuck in neutral that without shit like rising gas prices and crazy-ass California passing laws like this, we might never move forward of our own accord.
Now, admittedly, my condo doesn't have solar panels to drive the central AC I enjoy. While about 50% of the bulbs I have in my house are the low-energy florescents (sorry about my spelling - lets GO Firefox 2.0!) the other 50% are not - and some are halogens. I do take somewhat lengthy showers, and yes, I wash my truck. That's "truck", not "car".
So I'm not perfect. But small changes mean something. I pay an extra $15/month for PECO to deliver only wind-generated energy to my condo. I replace all dead bulbs with low-energy (and long lasting) florescents. I use public transportation to commute (because it's available to me). I'm a consumer, but I don't understand why I shouldn't be a somewhat responsible one too.
Having the technology to be nicer to this planet and not using it because of sheer complacency is unacceptable. IMHO.
Excuse my speling.
Making The Bar Project
Do you know of any consumers who would object to a price cap on gasoline?
Only those who were smart enough to take an economics class.
Shell reported 22.49 billion in profit for 2005. I think they could afford to have even a lot of tax increase.
Hey, wait, I thought capitalism was supposed to bring profits down, because everyone would compete and so there would be no room for large profits, and so someone would just undersell you? I've only seen profits increasing...
Incorrect. The prop doesn't tax the oil companies per se. It taxes oil pumped out of the ground in California. The law does say they can't pass the cost on to their customers, the refineries. Let's assume that the producers follow this, rather than justifying price hikes by being just a little bit creative. Costs for in-state pumping will go up, but the cost to run a well is constant, thus low-yielding wells will be shut down sooner. And companies doing exploration are going to look elsewhere rather than explore in Cali. Thus in-state production will go down-- estimates I've read go from 10-20% reduction in in-state production over 5-10 years. Consumers will still drive, demand will remain fairly constant, which means more oil will be shipped in from Alaska and overseas. Shipped in oil is more expensive. Refineries will have to pay the higher price for out-of-state sourced crude, and they most certainly can and will pass those higher costs on to their consumers. Net result-- if 87 passes, Cali gas prices will go up. Economics of commodities is a byatch.
The other thing I anticipate happening is that the oil companies are going to redouble their efforts to get permission to drill in Federal controlled waters. That means anything more then 3 miles off the coast. There is absolutely nothing Californians can do about it if Congress lets them do this, it's Federal "land" (at least treated as land) covered by federal law. And guess what, oil pumped out of Federal lands isn't subject to prop 87's severance tax. Problem solved!
1984 was supposed to be a warning, not an instruction manual.
"how much money is not being a Muslim or dead worth to you?"
A lot. But what did Iraq have to do with that? Why don't we bomb every other country just to be safe? You never know, Luiz Inácio Lula da Silva of Brazil could be having dreams of imperialism! We must invade before the smoking gun becomes a mushroom cloud!
Of course not, because oil companies don't pay the tax. Customers of the oil companies pay the tax.
JOIN US FOR PONG!
The problem with this kind of legislation is that it is not a tax on the oil companies. In the end, it is a tax on their customers.
The wacko-enviro-lefties seem to always forget that a tax always has a negative economic impact. It sometimes has a positive benefit somewhere else in society, and that benefit may even outweigh its negative consequences.
So, what's so bad about a negative economic impact? Economics is not just about rich corporate CEOs, lawyers, politicians, venture capitalists, bankers, inside traders, hedge fund bandits, leveraged buyout raiders. It's about your job, and the corner drug store, and the bicycle shop, and the Internet, the church down the block, and your grandmother's pension, and your local PBS station. Economics is about everything in life. It's about how we survive, and thrive, and interact, and plan for the future, and pay for the mistakes of the past.
So, what's the big deal about this kind of tax? It's one group of economic units using the political process to raid the resources of another group of economic units for ideological, or economic, or political reasons. They funnel that money from one group, through the government, and to another group. And this is the ugly part: all governments are notoriously bad about handling your money.
Make no mistake. That is your money they are talking about. Not the oil companies' money.
I had forgotten how much cooler teenagers look when they are smoking. Oh, wait
But the oil companies are complaining that Silicon Valley companies might make profits from alternative energy technologies. So they are conceding that alternative energy sources are profitable and good for growing the economy. That is a different story than they gave when Congress asked them to invest a small portion of their record profits in developing alternative energy sources. They said it wasn't profitable and would be "wasted" money. Instead they said the government should let them drill in wildlife refuges and that if Congress didn't let them, they "predicted" oil prices would go up. Sort of like how Don Corleone might predict bad fortune for your prize race horse if you didn't grant his favor. Heaven knows oil companies don't spend their profits on maintaining their pipelines that leak over public land...
You CAN NOT keep the costs from being passed on to consumers!!! Thinking that the government can change economic laws is like thinking the government can change pi, or change gravity. All the language on all the peices of paper in the world cannot change fundamental properties of economics.
The authors of that bill are idiots. I heard one of them on an interview last week, and his economic ignorance was disgusting.
Don't blame me, I didn't vote for either of them!