August 11, 2006

Can We Impose a Windfall Profits Tax Just on BP?

Discussion of a windfall profits tax has died down over the last few months in Washington, but might crop up again in the near future in the wake of new revelations that oil giant BP doesn't appear to care that much about maintaining their pipelines.

BP has enjoyed $31 billion in profits since the beginning of 2005. This isn't news-- after all, these record industry-wide profits are what drove Congress to hold hearings on a windfall tax to begin with. What's news this week is that BP is clearly not plowing these profits back into their infrastructure. BP has admitted not checking the pipelines for degradation as often as they're supposed to.

So where's the profit going? By one estimate, BP has plowed $22 billion into stock buybacks since the beginning of 2005. That's good for BP executives and shareholders, but (as it turns out) not so good for American consumers who just saw our domestic oil supply shrink by 8% as a result of BP's inept maintenance.

A big part of the reason why the Senate backed away from the windfall profits tax idea earlier this year may have been the perception that the industry was going to use these profits to reinforce their infrastructure-- and obviously a sound oil extraction infrastructure is a thing we need as a nation. But if a company as profitable as BP can't find time to prevent their most important domestic pipelines from falling apart, it's time to start asking these questions again.

And in an era when the federal government is controlled by folks who clearly don't believe in the government's regulatory role, it's also time to start asking questions about why the federal regulatory apparatus can't hold BP's feet to the fire in a proactive way to prevent such disastrous supply interruptions from happening. Just another reminder that the federal government has an important role to play, and that an unthinking deregulatory stance can have huge costs.


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