Windfall tax

InvesterJones

Albermarle said:

sevenhills said:

ranciduk said

No its the tories stealing Labour policy and renaming it instead of admitting they’ve made yet another u-turn 

I terms of the economy, Labour and the Tories are the same, with very similar goals and advisors.

Or you could say, they start off with different ideas, manifestos, ideology etc but when faced with reality, they will tend in the end to act in broadly similar centrist way ( ignoring Brexit which was a one off) 

So the overall long term effect will probably be less investment in the UK's extraction business and making us even more reliant on overseas supplies for our oil and gas leading to ever higher prices in the future ..but hey who cares about next 5-10 years.

The price of oil and gas is set by global supply and demand. Whether the UK pumps a few more million barrels or not, will not make any difference to the price. It will only mean we have to buy less from other sources we do not really want to rely on too much . So it is about security of supply, not price. 

Increasing prices should make alternatives more attractive so you'd hope it would result in improved domestic infrastructure for non-fossil fuels. I think I read that such alternatives are exempt from the windfall tax so if* extraction companies are really considering their investment as a result of this tax then they might be minded to move further into alternatives.

*I don't believe any are seriously reconsidering, but they're beholden to complain of course.

Dave.44

The UK side of BP are selling UK oil at international prices, even in the UK and their recovery costs have not changed. Of course they are making huge profits. It would seem fair to ask that they either reduce their UK market prices to what they were before and accept a reasonable profit margin or accept a windfall tax.  I think that the windfall tax is very likely as the Government would then have control of the money, but reduced prices would seem fairer as it would simplify gas and electricity costs directly. Either way it's going to happen, imho, as soon as we have a new PM.

wmb194

Dave.44 said:

The UK side of BP are selling UK oil at international prices, even in the UK and their recovery costs have not changed. Of course they are making huge profits. It would seem fair to ask that they either reduce their UK market prices to what they were before and accept a reasonable profit margin or accept a windfall tax.  I think that the windfall tax is very likely as the Government would then have control of the money, but reduced prices would seem fairer as it would simplify gas and electricity costs directly. Either way it's going to happen, imho, as soon as we have a new PM.

Why? If it makes more money then it will pay more corporation tax. If it makes more money it might continue to invest in the North Sea. It was making huge losses a couple of years ago when the oil price crashed... The market sets the price, not BP.  Anyway, the cure for high oil and gas prices is high oil and gas prices. In time they should fall again.

Albermarle

Dave.44 said:

The UK side of BP are selling UK oil at international prices, even in the UK and their recovery costs have not changed. Of course they are making huge profits. It would seem fair to ask that they either reduce their UK market prices to what they were before and accept a reasonable profit margin or accept a windfall tax.  I think that the windfall tax is very likely as the Government would then have control of the money, but reduced prices would seem fairer as it would simplify gas and electricity costs directly. Either way it's going to happen, imho, as soon as we have a new PM.

If BP dropped their prices in the UK, what about the other suppliers?  BP would be swamped with demand, and the other suppliers would divert their product to countries paying better prices. So we would have some lower prices but a critical shortage of fuel at the same time.

Dave.44

Albermarle said:

Dave.44 said:

The UK side of BP are selling UK oil at international prices, even in the UK and their recovery costs have not changed. Of course they are making huge profits. It would seem fair to ask that they either reduce their UK market prices to what they were before and accept a reasonable profit margin or accept a windfall tax.  I think that the windfall tax is very likely as the Government would then have control of the money, but reduced prices would seem fairer as it would simplify gas and electricity costs directly. Either way it's going to happen, imho, as soon as we have a new PM.

If BP dropped their prices in the UK, what about the other suppliers?  BP would be swamped with demand, and the other suppliers would divert their product to countries paying better prices. So we would have some lower prices but a critical shortage of fuel at the same time.

Only energy companies operating in the North Sea would be asked to charge recovery costs plus reasonable profit for the UK market only. Very similar to assessment for windfall tax. When it's gone it's gone. Other suppliers would be charging international prices. The UK is not self sufficient in oil and gas but it substantially is. So the shortfall needs to be made up from outside suppliers.  So there would be some effect from that.

wmb194

Dave.44 said:

Albermarle said:

Dave.44 said:

The UK side of BP are selling UK oil at international prices, even in the UK and their recovery costs have not changed. Of course they are making huge profits. It would seem fair to ask that they either reduce their UK market prices to what they were before and accept a reasonable profit margin or accept a windfall tax.  I think that the windfall tax is very likely as the Government would then have control of the money, but reduced prices would seem fairer as it would simplify gas and electricity costs directly. Either way it's going to happen, imho, as soon as we have a new PM.

If BP dropped their prices in the UK, what about the other suppliers?  BP would be swamped with demand, and the other suppliers would divert their product to countries paying better prices. So we would have some lower prices but a critical shortage of fuel at the same time.

Only energy companies operating in the North Sea would be asked to charge recovery costs plus reasonable profit for the UK market only. Very similar to assessment for windfall tax. When it's gone it's gone. Other suppliers would be charging international prices. The UK is not self sufficient in oil and gas but it substantially is. So the shortfall needs to be made up from outside suppliers.  So there would be some effect from that.

No, that would be a ridiculous idea and who determines what a, "reasonable profit" is? If I was operating one of these companies and this happened I would slowly wind down my operations in the UK and focus on investing and producing in markets where I'm not penalised by a mercurial government and society for taking big risks - don't forget Macondo and what that cost BP.

If you want people and companies to take entrepreneurial risks then you have to allow them to earn entrepreneurial rewards. Otherwise, what's the point? As they were a couple of years ago, nobody seems to care when these companies are struggling.

400ixl

Dave.44 said:

Only energy companies operating in the North Sea would be asked to charge recovery costs plus reasonable profit for the UK market only. 

Great way to kill off the North Sea oil fields. Why would any company continue to invest in North Sea oil if such an overhead of doing business there existed? They would just go elsewhere and pay more moderate taxes to other governments.

You would likely even drive some of these companies away from having their Head Office in the UK.

Dave.44

400ixl said:

Dave.44 said:

Only energy companies operating in the North Sea would be asked to charge recovery costs plus reasonable profit for the UK market only. 

Great way to kill off the North Sea oil fields. Why would any company continue to invest in North Sea oil if such an overhead of doing business there existed? They would just go elsewhere and pay more moderate taxes to other governments.

You would likely even drive some of these companies away from having their Head Office in the UK.

The North Sea oil companies are still likely to suffer a windfall tax but will be left in profit in the short term so worthwhile operating in the North Sea.  OK, I doubt if long term risks will be assessed for setting a windfall tax. If NS oil producers are allowed to charge more than the international rates in the UK when the price is very low it would stabilise our economy. Saudi Arabia has not changed their domestic oil prices.  Why should we? It's caused havoc to our economy.

wmb194

Dave.44 said:

400ixl said:

Dave.44 said:

Only energy companies operating in the North Sea would be asked to charge recovery costs plus reasonable profit for the UK market only. 

Great way to kill off the North Sea oil fields. Why would any company continue to invest in North Sea oil if such an overhead of doing business there existed? They would just go elsewhere and pay more moderate taxes to other governments.

You would likely even drive some of these companies away from having their Head Office in the UK.

The North Sea oil companies are still likely to suffer a windfall tax but will be left in profit in the short term so worthwhile operating in the North Sea.  OK, I doubt if long term risks will be assessed for setting a windfall tax. If NS oil producers are allowed to charge more than the international rates in the UK when the price is very low it would stabilise our economy. Saudi Arabia has not changed their domestic oil prices.  Why should we? It's caused havoc to our economy.

Saudi Arabia is a net exporter by a vast amount and its production is effectively state controlled. You're comparing apples to oranges.

Dave.44

In the UK we are substantially self sufficient in oil and gas. We are just not controlling the domestic market.