- Dec 18, 2001
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I have been having a discussion with several of my friend and co-workers about what can be done about oil supply issues.
One idea that I came up with is to set a price floor for oil in the US. For example we would set the price floor at $100/barrel and there would be a tax on any oil traded for below $100/barrel. I remember from my economics class that a price floor usually produces a surplus of a good. This would also help to encourage continued conservation of oil in the US because this would continue to keep the fuel prices high but hopefully consistent.
With a price floor companies could feel confident investing money to pull oil out of difficult areas like deep ocean drilling our investing in oil shale technologies. For example a company if they are going to try and drill in 15000 ft of water for oil and it might cost $60 barrel to extract they can feel confident that they can turn a profit even if the price per barrel of oil crashed.
I am not sure how the tax would fully work so it could be evenly implemented if the price per barrel dropped below $100. Maybe a VAT tax to bring the price up to $100 barrel before it goes into refining. So it might look like this is the current price per barrel is $60 and your production costs are $80 barrel to extract oil from say shale this oil would have a VAT tax of $20 barrel and the oil you purchased at $60 barrel from other sources would have a VAT tax of $40 barrel. While this might be difficult I don't think this is a show stopper.
The revenue from this tax could then be used for other purposes to help facilitate the US moving away from a petroleum based economy.
Fund tax credits for example on electric cars our alternative fuel vehicles.
Fund development of improved ethanol fuel production that doesn't use food crops
Fund building of mass transit
Fund development and provide tax credits for renewable energy production.
Fund a increase of the Strategic Petroleum Reserve to 5 Billion barrels of oil. Basically a 180-days supply of oil imports. Any oil in excess of this can be released into the market as needed to bring down the price when speculators start pushing up the price.
I have discussed this with several people and both conservatives and liberals alike don't seem to have a lot of negatives to say about this line of thought on my part. However I bet that people on this board can shoot this plan full of holes, so fire away.
One idea that I came up with is to set a price floor for oil in the US. For example we would set the price floor at $100/barrel and there would be a tax on any oil traded for below $100/barrel. I remember from my economics class that a price floor usually produces a surplus of a good. This would also help to encourage continued conservation of oil in the US because this would continue to keep the fuel prices high but hopefully consistent.
With a price floor companies could feel confident investing money to pull oil out of difficult areas like deep ocean drilling our investing in oil shale technologies. For example a company if they are going to try and drill in 15000 ft of water for oil and it might cost $60 barrel to extract they can feel confident that they can turn a profit even if the price per barrel of oil crashed.
I am not sure how the tax would fully work so it could be evenly implemented if the price per barrel dropped below $100. Maybe a VAT tax to bring the price up to $100 barrel before it goes into refining. So it might look like this is the current price per barrel is $60 and your production costs are $80 barrel to extract oil from say shale this oil would have a VAT tax of $20 barrel and the oil you purchased at $60 barrel from other sources would have a VAT tax of $40 barrel. While this might be difficult I don't think this is a show stopper.
The revenue from this tax could then be used for other purposes to help facilitate the US moving away from a petroleum based economy.
Fund tax credits for example on electric cars our alternative fuel vehicles.
Fund development of improved ethanol fuel production that doesn't use food crops
Fund building of mass transit
Fund development and provide tax credits for renewable energy production.
Fund a increase of the Strategic Petroleum Reserve to 5 Billion barrels of oil. Basically a 180-days supply of oil imports. Any oil in excess of this can be released into the market as needed to bring down the price when speculators start pushing up the price.
I have discussed this with several people and both conservatives and liberals alike don't seem to have a lot of negatives to say about this line of thought on my part. However I bet that people on this board can shoot this plan full of holes, so fire away.
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