Should the mineral oil companies be asked to pay?
(Photo: dpa)
In politics, there are calls for a so-called “excess profit tax” to skim off supposedly unjustified profits. Great Britain and Italy have announced corresponding laws.
But what would be taxed? First of all, any higher profit margins of the mineral oil companies in Germany per liter compared to other EU countries.
Long-term higher margins point to market failure, as higher profits should mean that larger quantities of gasoline are offered on the German market and the tax-adjusted price difference to neighboring countries largely disappears. If this were not the case over the long term, this would indicate that competition was not functioning properly and the Cartel Office would have to intervene. Defining and taxing the “unjustified” portion of the profit margin, on the other hand, is likely to prove impossible.
It will be difficult to prove an excess profit
The way to go would be to look at corporate profits and tax the increase (Italy) or simply the level (UK) higher. The question here, however, is whether the fact that profits have increased in the wake of higher oil prices is sufficient to define these profits as “excess profit”.
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Daniel Stelter is the founder of the discussion forum beyond the obvious, which specializes in strategy and macroeconomics, as well as a management consultant and author. Every Sunday his podcast goes online at www.think-bto.com.
(Photo: Robert Recker/ Berlin)
This week, Brent crude was a little under $120 a barrel, up 63 percent from a year ago and 20 percent from before the war in Ukraine began. Despite this, the price is only slightly higher than from March 2011 to May 2014 and still well below the June 2008 level.
It would be difficult to prove an “excess gain” here. Incidentally, the fact that prices at the pump reached new records is mainly due to the significant loss in value of the euro as a result of the ECB’s monetary policy.
>> Also read here: SPD and Greens bring additional tax for mineral oil companies into play
Russia’s war against Ukraine is not the main reason for the rise in oil prices – after all, Russian oil is not disappearing from the market, but is being bought by other countries. The cause lies in the significant decline in investments in the development of new sources. In the period from 2015 to 2020, this expenditure has more than halved.
Translated, this means that the winners of the price increases are those companies that have invested despite relatively low oil prices and uncertain prospects for the useful life of the developed wells in view of the world’s effort to move away from fossil fuels.
So it’s not “excess profits”, but legitimate reward for entrepreneurial courage. Operating here with additional taxes may be popular, but it contradicts the basic principles of our economic system. In the oil sector, it also weakens Western companies in competition with state-owned companies such as Saudi Aramco, which is unlikely to be in the interest of security of supply or in the interest of climate protection.
More: Eight reasons why an excess profit tax is not a good idea