Congress, Energy Prices & Housing
A: Congress is being blamed once again for the current energy crisis by the public. While I won't go into this in detail here, I will talk about how Congress (and specifically Senator Byron Dorgan of North Dakota) is considering a 'Windfall Profit Rebate' for Oil Companies to tax the incredibly high profits of the Exxon Mobil's & BP's of the world. This would be a COLOSSAL MISTAKE by law-makers should this pass as Congress should let free market forces, the cornerstone of our capitalist system, correct the current crisis in energy markets.
Windfall Profits Rebate Act of 2005: The Windfall Profits Rebate Act of 2005 (S. 1631) imposes a temporary windfall profits tax on big oil companies and uses the revenues to provide a rebate to American consumers to help offset the higher cost of oil and gasoline products.
According to Senator Dorgan's website, check out the profits per second that oil companies are making as you read this article:
Why am I talking about Congress and law makers when I host a NYC housing blog you ask quitely to yourself? Here's why!
HIGH ENERGY PRICES ---> HIGH PRECIOUS METAL PRICES ---> INFLATION CONCERNS ---> FED RAISES RATES ---> LENDING RATES RISE ---> HOUSING BECOMES LESS AFFORDABLE ---> ASKING PRICES COME DOWN TO COMPENSATE
Get it?
In case you don't keep tabs on this type of stuff, I will do it for you. In the past few weeks Congress's public opinion has taken a big hit mainly due to higher energy costs and the effects they have on the American's daily lives. As oil and gas prices rise, the little guys suffer! The people want action and Congress is considering a 'Windfall Profit Rebate' to impose higher taxes on oil companies who are reporting record profits these days to the higher prices of energy. This rebate would then be handed back to consumers to help 'ease' their pain at the pump.
THIS WILL BE A HUGE MISTAKE AND GOES AGAINST OUR CAPITALIST SYSTEM. LET MARKET FORCES KICK IN NATURALLY TO CORRECT THE CURRENT HIGH PRICES OF OIL. TRUST ME IT WILL IF WE CAN JUST BARE IT A BIT LONGER!
POINTS I RAISE:
1. As ExxonMobil Profits have risen 3-fold, the CEO has declared that payments in taxes to Uncle Sam have risen 4-fold? So, just like any company the big oil guys are paying up what is due on their profits. Why impose more taxes?
2. What about shareholders of these big public companies? Our capitalist system encourages companies to try to make as much money that is legally possible. Our publicly traded marketplaces such as NYSE & NASDAQ allow investors to buy shares in these companies if they believe business is good. By imposing any type of 'Windfall Profit Tax or Rebate' aren't you taking away what is duly owed to shareholders of these companies?
3. Why not simply incentivize alternative energy and more offshore drilling research and development without the passing of new tax law and rebate system? Congress should instead work on the environmentalists that are lobbying to prevent more drilling off-shore and in vast areas that they feel need to be protected. Now I know that Senator Dorgan's tax proposal would not kick in should the oil companies use any profits over $40/Barrel for this type of development, but I think he is going about in the wrong way.
4. How can we be assured that this won't be another corruptable inflow of money to the government? How can we be assured that this huge amount of money will be honestly and fairly distributed to everyone?
UrbanDigs Says: Forget the whole idea of a 'Windfall Profit Tax/Rebate' altogether and instead focus on passing tax benefits to oil companies for revenues re-invested in alternative energy such as ethanol/hydrogen fuelcell development. In addition, Americans MUST cut off our dependence on foreign oil either by alt. energy that is homegrown or by becoming a more oil independent country. The only way to become independent is for Congress to incentivize alternative energy development and for environmentalists to concede on some issues and allow more off-shore drilling and research off the coasts of California, Florida and in Alaska. Ethanol is already becoming a hot topic these days with oil above $70/Barrel; which means the slighlty lower price of this alternative energy source is sure to rise higher anyway.
WHAT CAN I DO TO HELP: Thanks to Glenn over at NYC: The Oil Drum for providing these very helpful tips on what residents of Urban & Suburban neighborhoods can do to pitch in!
Urban Tips: Mass Transit service improvements and extensions to underserved areas to replace car trips, more biking infrastructure, more rail/ports for bulk freight deliveries, energy efficient lighting / household appliances, more local food consumption and installing energy efficient heating/cooling systems. But largely, urban areas are very efficient - small spaces, mass transit, walkable to all of life's needs (groceries, jobs, entertainment, etc)
Suburban Tips: Much of the same applies to the suburbs, but they have much greater energy consumption per capita (Like 5-10x as much!). Create centers connected by rail/ports that have high density mixed use. In fact, putting corner grocery stores and other retail that are accessible by walking would greatly reduce non-essential travel by automobile. Live in a house that fits your needs - too many empty nesters are still living in sprawling 4 bedroom houses, they should downsize into a two bed ranch. Start a vegetable garden in the backyard. Use the more efficient car (if you own two) for the majority of trips and leave the SUV for carpooling or transporting large items.
Glenn's Final Note: Ultimately I believe that higher prices will provide incentives for much of this behavior, but the sooner we start doing these things, the easier the transition will be and the more we will be able to afford investing in infrastructure assets that help provide positive alternatives instead of drastically scaling back our lifestyle.
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Comments (3)
I would say first that we need to relocalize our tax and spending flows - too much of our money goes to the DC and Albany and precious little comes back for necessary infrastructure and service improvements that would allow our local officials to aloocate it more efficiently. We send $24 Billion to the state and Feds that we never get back each year. That would solve out budget problems in one swift move. Let the suburbs take care of themselves and stop mooching off us. Perhaps restoring the commuter tax would be a good first step.
I would add that the suburbs may be saved by telecommuting and other jobs that can be done anywhere.
Posted by Glenn | May 3, 2006 6:52 PM
I am infuriated by the political theater going on on both sides of the aisle...calls for hearings and rebates and WPTs, when all the while the government "earns" 40 cents on every dollar of pump price. It's unbelievable.
Posted by prankster | May 7, 2006 3:28 PM
WPT = higher cost to consumer, greater dependance on foreign oil, less money spent on domestic exploration and drilling.
The government is going to get its money, the question is whether they do it in a way that hurts the country or helps it. And it's clear, from historical evidence, that a WPT hurts the country.
Posted by miles | May 9, 2006 5:56 AM