Federal Income Taxation of the United States Petroleum Industry and the Depletion of Domestic Reserves: Final Report

Technical Report · Sun Oct 01 04:00:00 EDT 1978

DOI:https://doi.org/10.2172/6529605· OSTI ID:6529605

Flaim, Silvio J.; Mount, T. D.

This paper models in a dynamic framework the production activities of the United States petroleum industry in an attempt to measure the effects of the federal income tax on reserve depletion. This model incorporates general corporate taxes, including the capital subsidies, excess depreciation and the investment tax credit, and taxes unique to the industry: drilling subsidies and percentage depletion. Because corporate response to tax incentives depends on market power and behavior, three behavioral assumptions are tested for consistency with the 1960 to 1974 data period before the tax policies are simulated. These assumptions are perfect competition, profit monopoly, and sales monopoly. The tax policies simulated at the end of this paper present six possible alternatives for future petroleum industry taxation. Sales monopoly is selected as the behavioral assumption that best describes petroleum industry behavior. Tax simulations under sales monopoly reveal that historical income tax policies have kept oil prices artificially low, stimulating (subsidizing) reserve depletion.

• Research Organization: National Renewable Energy Laboratory (NREL), Golden, CO (United States)
• Sponsoring Organization: USDOE Office of Energy Efficiency and Renewable Energy (EERE)
• DOE Contract Number: AC36-08GO28308
• OSTI ID: 6529605
• Report Number(s): SERI/TR-52-41
• Country of Publication: United States
• Language: English

Related Subjects

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& Business Aspects
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FINANCIAL INCENTIVES
GEOLOGIC DEPOSITS
INDUSTRY
MATHEMATICAL MODELS
MONOPOLIES
NORTH AMERICA
PETROLEUM DEPOSITS
PETROLEUM INDUSTRY
PRODUCTIVITY
RESERVES
RESOURCE DEPLETION
RESOURCES
SIMULATION
TAXES
TRADE
USA
petroleum deposits
petroleum industry
productivity
resource depletion
taxes