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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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.
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