I See A Theme Here

I've been posting about the calls for oil companies to "donate" or pay windfall taxes on their profits.

It seems to me that this:

...(Senator Charles) Grassley (R- IA, the chairman of Senate Finance Committee) is now on record as wanting (the rhetorical equivalent of “demanding”) that oil companies “donate” 10 percent of their profits to help poor Americans pay their heating bills. Grassley sent letters to oil companies outlining his request; letters he claims to have sent to “embarrass” the oil companies into contributing to the Low Income Home Energy Assistance Program (LIHEAP). Embarrass? I don’t think so. The right word here would be “intimidate.” Grassley says “It’s not unreasonable to expect corporations with 50, 75 or 100 percent growth in earnings this quarter to contribute a mere 10 percent of those profits to fund programs that supplement LIHEAP. In those letters Grassley also asked that these oil companies report to him on their recent charitable contributions...

will lead to this:

...Twenty-five years ago, with gasoline prices at record highs and company profits "unconscionable" according to some, like-minded critics won the day in Congress and enacted a windfall profits tax. It was a disaster.

· It did not allow companies to charge world market prices for "old oil." So they could not spend money to rework oilfields; domestic production dwindled rapidly.
· It allowed them to charge market prices only for "new oil" from new areas. Companies had to bypass oilfields that they had discovered but not yet developed, and search (wildcat) in less likely places. Again, domestic production suffered.
· It allowed them to charge world market prices for imported oil. So the companies began to explore more in highly promising places overseas. Domestic production suffered; overseas exploration and development boomed.
· Critics complained that the companies were abandoning the US. One oil executive responded, "We're not moving out of the US; we're being thrown out."

Every subsequent study, including from the US Congress now entertaining the tax, showed that the era's price controls and windfall profits tax contributed greatly to our nation's increased reliance on foreign oil. Those policies did exactly the opposite of what they were intended to do. But without institutional memory, critics seem again ready to fall back on the old, failed policies and "do something" no matter what the result may be...

Read all of both of these articles.