US refiners slam Obama plan for windfall tax

05 August 2008 00:29  [Source: ICIS news]

WASHINGTON (ICIS news)--US petrochemical and refining interests on Monday criticized plans by Senator Barack Obama (Democrat-Illinois) to impose a windfall profits tax on energy firms, saying it would make the US more dependent on foreign oil.

 

The National Petrochemical & Refiners Association (NPRA) said that an energy plan announced by the presumed Democrat presidential nominee would discourage investment is domestic US energy resources at a time when the nation needs all possible oil and natural gas production.

 

In speech in Lansing, Michigan, earlier on Monday, Obama unveiled an energy plan that he said would help end the country’s addiction to oil, what he termed “one of the most dangerous and urgent threats this nation has ever faced”.

 

Saying he wants to end US dependence on oil from the Middle East and Venezuela within ten years, he said the country should produce within six years more than 1m hybrid automobiles capable of 150-mile-per-gallon fuel efficiency.  He also said US electric power generation should be 10% renewable by 2012.

 

He said his plan also would include a windfall profits tax on oil corporations, and that revenue would fund a $1,000 (€640) rebate to taxpayer families burdened by high fuel prices.

 

The NPRA said in a statement that on the evidence of an earlier US windfall tax on energy, the result of Obama’s plan would “reduce the low of capital into home-grown American energy businesses, resulting in a negative impact on production and a boost in imports”.

 

The US petrochemicals industry is heavily dependent on natural gas as a feedstock and energy source and has lobbied for more access to US domestic oil and gas resources.

 

The petrochemical and refiners trade group cited a March 2006 study by the Congressional Research Service (CRS) which found that the windfall profits tax (WPT) imposed on US oil companies in the 1980s “had the effect of reducing the domestic supply of crude oil below what the supply would have been without the tax”.

 

That effect in turn “increased the demand for imported oil and made the US more dependent on foreign oil as compared with dependence without a WPT”.

 

“In the long run,” said the congressional study, “all taxes distort resource allocation and even a corporate profit tax (either of the pure type or the surtax on the existing rates) would reduce the rate of return and reduce the flow of capital into the industry, adversely affecting domestic production and increasing imports.”

 

($1 = €.64)

 

To discuss issues facing the chemical industry go to ICIS connect

By: Joe Kamalick
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly