The Democrats New Energy Bill

The NYT just posted a short summary of the Senate Democrats new proposed Energy Bill. The features:

1. Revoke $17 billion in corporate tax breaks for oil companies
2. Slap a 25% windfall profits tax on companies that don't invest in new energy sources
3. Stop the Energy Department from filling the Strategic Petroleum Reserve until crude oil prices average $75 a barrel or less for 90 days

As someone who has become used to energy bills that actually make matters worse and waste tens of billions of dollars of taxpayer money, I paused a little, thinking this isn't so bad is it?

Point #1 is a no brainer and something I am surprised the Democrats have not been making a major campaign issue. Forget a gas-tax holiday, why in the world should oil companies with record profits be getting tax breaks?

Point #2 is definitely not something that is first-best by any means since windfall profits taxes are generally bad policy, but if you're going to do it, it seems that linking to a requirement to invest in new sources (as a way to get out of it) isn't quite as bad.

Point #3 seems more like political theater since I don't think the petroleum reserve affects prices all that much and as environmentalists high gas prices is what we should advocate.

So all in all, not utterly and completely insane, so what am I missing?

Comments

[John Whitehead]

A J.S. sighting!

[...]

What happens if we never fill the Strategic Petroleum Reserve? There's a fair chance that oil will never get back to $75 / bbl.

[joshua corning]

1. Revoke $17 billion in corporate tax breaks for oil companies

If as advertised not a bad idea ( a better one would be to give everyone the tax break)...but somehow i would actually like to see what these tax breaks are. It would not surprise me at all if these tax breaks were the same tax breaks that any business gets but then we are talking about Democrats here....and yes this will cause gas taxes to rise and lower supply. (profit is the incentive here and if you take that away the oil companies will have less of an incentive to produce more)

2. Slap a 25% windfall profits tax on companies that don't invest in new energy sources

Wow a business finds a way to lower costs and improve profits and so now we need to punish them...brilliant. This will also raise prices and lower the incentive to produce more.

3. Stop the Energy Department from filling the Strategic Petroleum Reserve until crude oil prices average $75 a barrel or less for 90 days

How full do they want this thing to be in the first place? Why isn't it full already? (ya i know Clinton sold some it off during Lewinsky) Anyway the reserve is in case of emergencies not for political favors and if the Dems are going to abuse it like this then I suggest we just get rid of it. It is no wonder in my mind that decades long Democrat control left Louisiana and New Orleans so badly prepared for Katrina despite the huge amounts of federal money that has gone into that black hole over that same time period.

[Anonymous]

While (1) is still in place, considering (2) is daft. Requiring electricity retailers to contract for a higher percentage of renewables would create some pressure for more investment (the Brits did this somewhat successfully for a while). You could get (2) without a windfall profits tax if you were willing to accept more regulation; if you expect oil companies to invest, you have to allow periods of super normal profits (cyclical industry), but that doesn't mean you can't influence how the profits are used.

[...]

... decades long Democrat control left Louisiana and New Orleans so badly prepared for Katrina

jc
Which decades? the 50s were Eisenhower, the 70s were Nixon, the 80s were Reagan. Are you talking about the '60s? Or '90s?
The Republicans controlled the House thru the majority of the '90s. That leaves us with the '60s. Doesn't seem like a good argument.