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4/2/2009
I am not Big Oil
Tom Schmidt, was the first to testify. Made me sit up and take note at yesterday’s Joint Finance Committee public hearing in Appleton. (I blogged about it quite a bit – see those commentaries titled “Budget Hearing: …”) Tom is one of the owners of U.S. Oil, nearby in Combined Locks. A staple in the community since 1951. One of our own, kind of thing, an owner of independent service stations and a gas and oil supplier. It’s my understanding they know the oil markets as well as anybody. Experts, in our own backyard. Imagine.
Schmidt said:
“Passage of an oil profits tax will have devastating consequences to business, industry and the Wisconsin people.” And [now I’m paraphrasing a bit] big oil will not hesitate to divert product from Wisconsin. Though they have not said it outright, be assured many suppliers have put us on notice. Supplies will be short and prices will be higher. We will have to lose money on every gallon. Schmidt asked members of the Joint Finance Committee to do two things: 1) talk to economists to understand what an “oil profits tax” would do to oil prices and supplies in Wisconsin and 2) read their own Legislative Fiscal Bureau’s 2007 report. You remember. When this tax was proposed – and defeated – the first time. I suspect the report Schmidt referenced is the Fiscal Bureau’s Paper #761 issued May 31, 2007 Its 14 pages are pretty enlightening.
Some evidence suggests that regulating the prices that can be charged for fuel products could impact the supply of that product to the regulated area.
… an intervention in the pricing of fuel could impact [a] company's decisions on where to deliver fuel supply.
… During such tight fuel supply periods, the proposed anti-pass-through provision could put state fuel retailers at a disadvantage for fuel supply given its potential impact on profitability. It may be conceivable that, during periods of tight fuel supply, suppliers may choose to supply fuel to other states within the Midwest region rather than realize reduced profits in Wisconsin associated with having to absorb the cost of the oil company assessment. Such a decision could further tighten the fuel supply for certain retail outlets in the state, which could exacerbate the temporary fuel price spikes that typically occur during a tight fuel supply event. It could also lead to more frequent tight fuel supply events. It goes on to address in detail how the oil company assessment could affect fuel suppliers differently and various types of retailers differently. What a mess of profit losses for Wisconsin businesses.
While you’re at it, take a look at page 4 of this Fiscal Bureau paper (#763) that explains just how the Dept. of Revenue would audit an oil company to enforce the excess profits tax. It starts like this, acknowledging the difficulty of first figuring out how the industry works before they can figure out how to catch them passing the tax on to customers. Unbelievable!
DOR will consult industry experts to learn more about industry practices. Department staff expect economists with industry knowledge to have information and practical suggestions about industry accounting and pricing practices. Oh my. Oh my. And the enforcement gets excessively bureaucratic and labor-intensive from there.
Later in the afternoon, a representative of Quality State Oil, Sheboygan, told a tale similar to Schmidt’s. I saw, and talked to Chuck Van Zeeland of Van Zeeland Oil, another one of our hometown Big Oil Villains. (I didn’t hear him testify.) Still later, and quite apart from the first two testifiers, a representative of Kwik Trip spoke of unintended consequences. Over 35 business people and employees tromped down one aisle, all clad in red t-shirts emblazoned with “I AM NOT BIG OIL!.” And still more of the bright-shirted folks peppered the audience. I was moved by the display of passion and I guess, by what almost seemed like innocence. Why, the speaker asked, would a supplier sell product to WI when they would make less money? "I strongly oppose the oil companies’ profits tax, not only as an employee, but also as a Wisconsin resident.”
The whole day was great. Only in America. I’m sure Committee members are getting pretty tired of these meetings by now (only one more, Friday), but I loved it.
Jo Egelhoff, FoxPolitics.net
COMMENTS
Now I know what jobs were taken by those kids who slept during my economics class ... They went on to politics.
The very same people who firmly believe that taxing cigarettes will decrease smoking, just do not comprehend that gasolins has absolutely the same characteristics.
They are also the same block heads that think they can tax something and the tax will never be passed on.. they are correct in only one aspect, that it will happen IF gasoline is not sold here...and the speaker is posting a warning.
I for one, would love to figure out how to pipe the air from the capital building in Madison to my gas tank. It is loaded with biofuels !
Rich Carlstedt (Fri Apr 03 00:20:58 2009)
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