Duquesne Energy Group Announces Recommendations for Oil Company Windfall Profits
Duquesne University’s Energy Policy Research Group (EPRG) today released recommendations on a national policy response to excess oil company windfall profits. The recommendations are contained within the EPRG’s “Program for Oil Security” (POS), a summary of which was announced on Oct. 4. The program resulted from discussions among public sector, private sector, and academic experts and is currently under review by policy makers in Washington.
“The fundamental question of national security now extends to the ability of Americans to afford a decent lifestyle,” said Dr. Kent F. Moors, professor in The Graduate Center for Social and Public Policy at Duquesne University and head of the EPRG. “The rapid rise of energy prices, combined with the exorbitant profits reported by oil companies, obliges that policymakers address the justifications of an unfettered pursuit of oil profits.”
Two overarching principles apply in the POS suggestions. First, the approach must secure additional relief to the oil product end users in the United States, both in terms of price and volume availability, without sacrificing the necessary investment required for the oil sector as a whole. Second, proceeds from any increase taxation must be directed to such end user relief, not to the general budget.
The specific suggestions are contained in three categories.
- The introduction of an incremental profits tax (IPT). Following the determination of an acceptable rate of return on investment, any additional amount would be taxed at a higher rate. The tax would be applied directly to the oil company’s aggregate profit, not incurred by the individual investor.
- Proceeds from the IPT would be used to reduce current oil product related taxes imposed on consumers—both the general public and industrial users—thereby guaranteeing that the increased revenues are applied to reduce what end users are paying for fuel. The revenues from the IPT are not simply made available to the general budget.
- U.S. oil companies can utilize the current $12 billion of tax concessions contained in the recently passed Energy Plan only if: (1) the funds are utilized to increase crude oil and oil product availability for the U.S. market; and (2) a determined percentage of that additional crude is placed in the Strategic Petroleum Reserves (SPR) specifically for use in the U.S. oil products retail market. That crude also needs to be of higher grade than the oil usually placed in the SPR; and (3) additional refinery capacity is developed both here and abroad.
“Under these proposals, investment in oil companies and projects would remain an attractive option, but the availability and price of oil products would reflect American domestic market needs, not company bottom lines,” Moors said.
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