The oil companies are reporting big profits. From the WSJ's Evening Wrap (10/26):
In other key earnings reports, oil titan ConocoPhillips said high oil prices boosted its third-quarter profit 89% from a year ago to $3.8 billion, beating forecasts. Revenue at the No. 3 U.S. oil major jumped 43% to $49.7 billion.
What can a politician do about windfall profits?
Senator Clinton gets busy (Sen. Clinton calls for $20 billion fund from oil companies):
The senator pushed a "strategic energy fund" which she said could bring in as much as $20 billion a year for new research and give rebates or tax breaks to those straining to pay rising heating bills.
Other Democratic senators, including New York's Charles Schumer and Illinois' Dick Durbin, have proposed a new tax on the increase in profits seen by major oil companies this year.
In contrast, Clinton never described her plan as a tax, saying her goal is to get "oil companies that have experienced these amazing profits either to reinvest them in our energy future to reduce our dependence on oil or to contribute to a strategic energy fund that will provide incentives for companies and consumers who want to be part of an energy solution."A fee, the senator said, should be taken solely out of unexpected profits to oil companies, without passing the cost on to consumers.
Of course, this proposal raises a lot of questions but a few things are clear. The fee is a tax. Taxes on sellers tend to reduce supplies (in the economic sense of the word, not geological resource stocks) and increase prices. Rebates or tax breaks to energy consumers tend to increase demand and increases prices.
The populist Senator Clinton wants to stick it to the oil companies and help out the little guy. In the process, oil prices rise and rise again and without much encouragement to use less energy.
On the other hand, if renewable energy resources are truly viable substitutes, renewable subsidies increase renewable energy supplies, decreasing prices and making them more competitive with the now higher priced nonrenewable energy resources. This brings us closer to the "switch point" -- the time when renewables are competitive with nonrenewables and society actually switches to the renewables.
But, if the switch point would be reached anyway, what's the hurry?
