Nixed: No Windfall Tax on Big Oil from Obama
By Keith Johnson
Wall Street Journal
December 3, 2008
Political theorists have long worried about the “tyranny of rising expectations.” What about the tyranny of dashed expectations?
President-elect Obama already riled up many supporters with his early picks for the administration, such as Iraq hawk Hillary Clinton for Secretary of State. The choice of Marine Gen. Jim Jones for national security adviser spurred others to fret about a “catastrophe” for the administration’s energy and climate policy.
So what happens now that Mr. Obama has erased the idea of a windfall profits tax from his energy plan?
Apparently, the transition team quietly rubbed out the proposal to slap U.S. oil companies with a windfall profits tax a few days after the election. While it wasn’t exactly the centerpiece of Mr. Obama’s energy proposals, it sold well at a time of $140 oil (and it would have been earmarked for household energy “rebates,” not clean-energy invesment, like we believed.)
But the price of crude oil has tumbled, losing about $100 a barrel since July. That’s why the windfall tax is now off the table, Obama advisers told the Houston Chronicle. Windfall taxes were always a controversial idea—having been tried in the 1980s—but make less sense when oil companies are struggling more to finance future investment.
That’s got some people furious. Lloyd Chapman, the head of the American Small Business League who noticed the change, wonders if the nixed windfall tax is “a further indication that large corporations are already demonstrating their ability to influence the Obama administration.” Big Oil, on the other hand, is predictably giddy. Reason Online cried “hooray for economic sanity.”
The bigger question is what this portends for future energy policy in the Obama administration. The president-elect is still an outspoken advocate of new climate-change legislation, but congressional leaders warn that is unlikely in the short run. The gloomy economy—and the need to fix that first—threatens to push other big promises like a clean-energy revolution onto the back burner in the short run.
The Obama team has often talked of hitting the ground running come Inauguration Day; will it find itself running into headwinds from its own supporters?