There is a lot of talk about taxing oil companies a windfall tax because of how much money they have made recently.
How does this affect the price of fuel in a positive way (i.e. make it go down in price)
Surely an oil company that gets a sudden tax bill is going to put the price of fuel up to offset what they are paying in tax?
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The theory is that it will force Oil Companies to reduce their profits in order to avoid paying the tax.
But does that mean lowering the price of gas? Not necessarily
Instead they could invest it internally on RnD or buy property and companies instead to raise their share price.
Such talk of a windfall tax is probably better thought of as a scare tactic to tell the Oil execs to smarten up because they are hurting consumers and the economy for their own personal benefit, and if necessary the government will step in to hurt them.
Oil is such a critical part of our day to day lives it’s kinda surprising there’s been no push to nationalize oil companies. Most 3rd world countries did that, basically the government seizing and/or buying their oil industry so that the profits become tax revenue for that government.
Alternately the government should just invest a ton of cash in technology and resources to reduce the demand on oil. Such as better public transport and better electric car infrastructure. That would solve the root problem and help make countries more energy independent.
Increasing taxes for oil companies is not going to decrease the price of fuel. You can not reduce the price of fuel because there is missing supply and the only acceptable way to reduce demand to match the supply is to increase prices. For example subsidizing fuel would just cause the prices to increase as more people have money for fuel and are willing to pay more for it.
But taxing the oil companies more can make it possible to fund other social and infrastructure programs to make the effect of the higher fuel prices much less for regular citizens. For example increase public transport so people who can not afford fuel for their cars can still get to work, shops and bars. It would also be possible to increase poverty support so those who get pushed under the poverty limit due to the increased fuel price will get the help they need. Or you could just take the money from the oil companies and cut a check to everyone.
The only reasonable way is to make functioning anti trust laws.
The price goes up to unfair level IF there is no competition. An old trick used in some countries is to have one state run oil company that runs “no profit style”. This means all the private ones have to make their profit in challenging the state run company by using better products/distribution/tech instead of just agreeing with the competition onto inflating the price. Private companies are more efficient and can still prosper, but if they cheat they lose market very quickly.
Increase the costs on the producer, and they’re just going to pass that cost off on the consumer, raising prices.
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