US bill for energy windfall profits tax is misguided – refiners

23 January 2012 21:54  [Source: ICIS news]

WASHINGTON (ICIS)--Legislation newly proposed in the US House of Representatives to impose a windfall profits tax on domestic energy producers is misguided and would raise costs for consumers, a refining industry leader said on Monday.

Charles Drevna, president of the National Petrochemical & Refiners Association (NPRA), said that a House bill introduced by Representative Dennis Kucinich (Democrat-Ohio) would establish federal energy price-fixing.

The bill, HR-3784, the “Gas Price Spike Act”, is aimed at putting a cap on rising US gasoline prices and other fuel costs, according to Kucinich.

Gas prices continue to rise, creating a hardship for the American people,” Kucinich said, “while oil companies are making record profits gouging their customers.”

US retail gasoline prices have increased by more than 9% on average in the last 12 months, according to the Department of Energy (DOE). US retail diesel prices are up by 12% over the same period.

“This bill would tax only the excess profits and create forward-thinking transportation alternatives,” he added.

If passed by Congress in its present form and signed by President Barack Obama, HR-3784 would establish a “Reasonable Profits Board” with three members, appointed by the president.

The board would determine whether the profits of individual energy companies – producers of oil, natural gas or derivative products – are reasonable and assess windfall taxes ranging from 50% to 100% of the profits deemed unreasonable.

Revenue raised by the windfall taxes would be used to subsidise municipal rapid-transit system fares and consumer purchases of fuel-efficient automobiles made in the US.

NPRA’s Drevna said that the Kucinich bill “is a misguided attempt to replace free market competition that is the basis of America’s economic success with government price-fixing that has repeatedly proven to be a dismal failure in countries around the world”.

Noting that the cost of crude oil accounts for 70% of the cost of refining gasoline and other transportation fuels, Drevna said that “the best way to hold down the cost of fuels is to give American companies greater access to American oil deposits”.

He also renewed his call for the Obama administration to approve the Keystone XL pipeline project, which would bring more Canadian crude oil to US refineries. The administration recently rejected the project.

Drevna called on the White House to “stop overregulation of refiners that is raising their manufacturing costs with no real environmental benefit”.

Cosponsored by five other House Democrats, the Kucinich bill has been referred to House committees governing tax policy and transportation issues.

The bill is not expected to gain much traction in the Republican-controlled House.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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