Instead of a “windfall profits tax” on oil, The US needs an import tax of $2.00 per barrel on all oil imported from foreign countries excluding NAFTA partners in North, Central and South America. This will keep domestically produced oil cheaper and encourage independent oil operators to continue their quest to discover new oil fields in the US. It will also help pay for reducing our national debt.
Since I was instrumental in advising Democrats to impose the windfall profits tax in 1980’s, I believe it is important to note that I believe a different type of tax is now necessary. We now import twice as much oil as we did in 1982. We need a foreign oil import tax to (1) reduce the Iraq war debt that President Bush has imposed on us and (2) to provide an incentive for domestic production.
It is well known that independent oil operators have discovered most of the inland oil fields in the United States. We need the independent “wildcatters” to help us discover more American oil. The oil fields in the Western hemisphere are enormous and inland. Bush helped by rescending the Executive Order on offshore drilling which has started the major oil companies to plan for offshore drilling in offshore leases that are already approved. and we should see results from that in about 18 months. We can raise billions of dollars to reduce the debt (debt-reduction.html) our children are now burdened with because of the Republican party. We will depend less on China and Japan to buy our treasury securities to keep our economy from total collapse.
I have proposed a $2.00 a barrel import tax on this foreign oil that would be reduced $1.00 when foreign imports fall below $100.00/bbl. What we must remember is that Democrats have put a floor of $100.00/bbl on imported oil. That was done when the bill to stop buying oil for the Strategic Reserve had the clause that purchases would resume when oil fall below $100/bbl. When blended with the free trade Nafta oil that would be about 3 cents a gallon. Also we need a 5 cent a gallon tax on imported gasoline to keep foreign sources from circumventing the oil tariff. This revenue will fund tax incentives for alternative sources of energy.
This is an easily imposed tax, and does not have the complicated calculations and oversight that the Windfall Oil Profits Tax of the 1980’s imposed on even the smallest of oil operators.
Along the same line, expect gasoline to be below $3.00 by election day, pending any geopolitical uprising or catastrophic disaster involving crude oil production. The timing of the Russian invasion of Georgia is in part a reaction to falling oil prices. Russia’s main source of government income is from the high price of oil. Crude oil was in a free fall headed to $80.00/bbl when Russia invaded Georgia. Russia knows the more it stirs the pot higher oil futures contracts will go. Speculators are selling their futures into the current bounce in oil prices. The volume in petroleum futures contracts is decreasing and the NY Merc locals are getting out. When the volume of trades decreases, prices decrease. Fast.
The Economy, the Democrats, and Big Oil in 2009 