Analysis of the Crude Oil Windfall Profit Tax

Technical Report · Fri Apr 01 04:00:00 EST 1983

OSTI ID:6327265

Farmer, R

This paper presents a conceptual analysis of the key features of the United States crude oil windfall profit tax and looks at 1980 petroleum industry investment and production data to evaluate the initial impact of the tax. The conceptual analysis attempts to explain, as opposed to rigorously deriving, the principal distortion effects that basic economic theory indicate should be expected from a multi-tier, variable rate tax on an exhaustible natural resource. This explanation relates the economic concepts of short- and long-run supply to the basic engineering technologies used both to sustain reservoir production and to locate and develop new reservoirs. In addition, this conceptual analysis considers the impact of the following specific features of the windfall profit tax: lower tax rates for independent producers; lower tax rates for production using tertiary recovery technologies; a limit on tax liability tied to net income from properties: and a legislated termination date for the tax. The conceptual analysis presented in the paper indicates several trends in crude oil exploration, development, and production activity that should be anticipated as a result of the windfall profit tax. These trends affect both domestic oil production rates and federal tax revenues.

• Research Organization: USDOE Energy Information Administration, Washington, DC. Office of Oil and Gas
• OSTI ID: 6327265
• Report Number(s): DOE/EIA-0396; ON: DE83012177
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700* -- Petroleum-- Economics
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& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
294002 -- Energy Planning & Policy-- Petroleum
CONSTRAINTS
ECONOMIC ANALYSIS
ECONOMIC IMPACT
ECONOMICS
EXPLOITATION
EXPLORATION
INDUSTRY
INVESTMENT
PETROLEUM INDUSTRY
PRODUCTION
TAXES
WINDFALL PROFITS TAX