California’s imposition of a windfall tax on oil companies would be damaging, according to an energy expert who spoke to FOX Business.
Democratic California Governor Gavin Newsom on Friday called for a windfall tax to be levied on profits over a set amount for companies involved in oil extraction, production and refining. The funds raised by the tax would then be “directed toward rebates/refunds to California taxpayers impacted by high gasoline prices.” according a press release from Newsom’s office.
“Crude oil prices are down but oil and gas companies have raised pump prices in California,” Newsom said in a statement. “We are not going to sit idly by while greedy oil companies swindle Californians.”
The average regular gas price in California was $6.29 on Friday, according AAA. This price is up 11.3% compared to the average price of $5.58 a week ago. Meanwhile, the national average regular gas price on Friday was around $3.80.
Phil Flynn, a FOX Business contributor and senior market analyst at the Price Futures Group, said such a fallout tax would “further discourage investment in an industry that desperately needs capital to stay in business in a government environment. increasingly hostile. he said.
In April 2021, Newsom signed an executive order to stop oil mining in california by 2045. Most recently, in August, the California Air Resources Board moved to require all new vehicles in the state to run on electricity by 2025, a policy the governor previously asked regulators to consider.
“There’s this misperception – created in part by The politicians — that somehow energy companies are making too much money,” Flynn told FOX Business. “The truth is, their profits are higher than they have been in the past. , but they fail to put that into perspective of how much these companies need to invest to bring supply to market, and it fails to account for government regulations that have restricted supply and also driven up prices. It also ignores the fact that most of these energy companies in the past were losing money just a few years ago.”
Flynn told FOX Business that the one-off tax Newsom was seeking was a “tool to shift blame” on oil companies “who are just trying to do their job and keep the market well supplied.” This would restrict supply and drive up prices in the long run, he said.
While a windfall tax may “sound nice to the average person,” Flynn said it would also reduce incentives and investments for oil companies and “strangle” their long-term viability. It could also have an impact on people 401(K)she argued.
“If these companies are not making a profit, who is going to invest in their oil stocks?” he said. “And if you have oil inventory in any part of your 401(k) – whether you know it or not, most Americans know it, they might not even realize it – they withdraw from it. money from your 401(K) to pay for their bad policies because those actions aren’t going to do as well.”