Absurdity of California Oil Profits Tax Becoming More Obvious

Commentary

It never made any sense for a businessman named Gavin Newsom, now California’s governor, to come out against profits—in this case, for the oil companies. In calling He branded it after a special session in the Legislature last November “price gouging” By “Big Oil.”

Even his fellow Democrats were skeptical at the hearings held last week at the Legislature. Said Sen. Steve Bradford (D-Gardena): “In our pursuit to address gasoline prices, we must ensure our actions that we take first [do] no harm to consumers.”

Sen. Dave Min (D-Irvine) last month introduced Senate Bill 599California’s offshore oil drilling ban. Even he stated at the hearing that he did not agree with this idea. “There is clearly a belief out there among many people that oil companies were profiting off the backs of Californians. At the same time, we don’t really have a smoking gun as far as I can see, that shows intentional collusion.”

Min running A U.S. House seat in The “purple” 47th Congressional district. Currently, it is held by Katie Porter (Democrat), who is running for the U.S. Senate spot being vacated now by Dianne Feinstein. But Porter barely won Last November’s re-election, 51.6% to 48.4%. Moderate voters won’t be attracted to new taxes.

As I wrote The Epoch Times December issue contains today’s “record” Profits are actually a reflection of the huge losses oil companies suffered three-years ago when the COVID-19 lockdowns actually decreased the price of one gallon of oil below $0. It’s currently $79.85, which is roughly the average for the past three months.

I keep track of my gas expenses for my creaking old 2010 Camry—here’s what I have been paying per gallon for the 150,000-mile flivver at Costco or Arco:

• March 5,2020 (just as COVID was hitting) $3.20
• April 23, 2020 (heightening of the pandemic). $2.58
• July 9, 2020 (lockdowns and easing) $2.99
• Jan. 3, 2021 $2.84
• February 10, 2021 (Biden president three weeks) $3.28
• Jan. 24, 2022 (Biden president, for one year) $4.70
• March 2, 2022 (Ukraine War in One Week) $5.00
• March 25, 2022 (Ukraine War at a Month) $6.42
• Jan. 30, 2023 (Biden has been in office for two-years) $4.30

The real reason for price increases can be seen at 1. As mentioned, COVID recovery is possible. 2. Biden elected President shuts down Keystone pipeline 3. Biden pauses New oil leases 4. Ukraine War and its resulting ban Russian oil imports to U.S. and EU 5. General inflation under Biden.

After my December analysis, the Chapman University economists Jim Doti and Raymond Sfeir were interviewed by Fadel Lawandy on February 9, 2009. wrote Something similar:

In 2020-21, Chevron suffered annual losses of $33.5 Billion. These losses are almost as big as the company’s inflated profits of $35.5billion in 2019. Even that profit of $35.5 billion isn’t all that great when one considers that those profits as a return on sales were 15 percent — not far off the S&P 500’s average return on sales of 14.2 percent over the same period.

Chevron is a winner if it can match average returns.  Past performance has not been great. Chevron’s 2021 return on sales was 10%, which is significantly lower than the S&P 15.5 percent. Chevron’s 2020 return on sales was even lower than the S&P’s 15.5 percent. The S&P average return was 10.4 percent. Chevron’s poor performance in 2020 should not be surprising, as that was the year that spot oil prices briefly fell.

What is the outcome? My guess is that Newsom and the Legislature will quietly drop the entire thing. Newsom, like I have stated many times, is a skilled politician. Sensitive politicians know when it is best to release a trial balloon and when it should be let go.

Newsom had some excellent grandstanding points in his fight against Big Oil. These will be helpful to him in the Democratic primaries next spring or 2028, with particular support from environmentalists. He can simply say that if it is brought up within a year or later. “That was a great idea the Legislature just wasn’t ready for.”

There will be no debate over the text of a tax and no TV appearances by economists saying it’s bad. “tax increaser” His business suit was marked with his label.

The views expressed in this article reflect the author’s opinions and are not necessarily those of The Epoch Times.