Oil prices are low. You may have noticed. And now the markets are. They are reacting in two ways.
First, they have realised that low oil prices should boost the economy. Is that why markets are rising again?
Second, they are pricing in low cost per barrel for some time to come. I don’t thgink anyone thinks the days of $100 a barrel, or more, are returning soon.
So what’s the implication? Three, I think.
First, without harming the economy we could increase the tax on oil at present. We do not need the risk of defaltion current low prices brings.
Second, we should increase the tax on oil: we have made cliamte commitments and burning more oil cannot help fiulfil them.
Third, when banks do really look to be in some trouble we need new revenue streams. That is oil.
The case for increasing oil taxation is very clear. But will anyone have the courage to do it?
I’ll be watching in March.
We do actually have oil taxation in Britain at the moment. We have taxation of indigenous production, as we should do, and that’s at around and about the rate the pips squeak, as the taxation of such resource rents should be. We also have swinging taxes on oil use. It might be that rail or agricultural use of diesel isn’t fully taxed but the main use of oil is of course in private transport (we use almost nothing for electricity generation). And that’s really rather fully taxed. Indeed, the fuel duty escalator has increased petrol taxation by more than double the amount of the Stern Review’s carbon tax.
It would be interesting if our 0.2 of a professor realised all of this of course. You know, considered the amount of tax already being charged rather than just looking at the falling untaxed price and deciding for MOAR TAX.