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Energy expert says California’s windfall tax is a bad idea

Energy expert says California's windfall tax is a bad idea
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According to an energy expert who spoke to FOX Business, introducing a windfall tax in California would be detrimental to oil companies.

Democratically Governor of California Gavin Newsom on Friday called for the imposition of a windfall profits tax on profits above a set amount for companies involved in oil exploration, production and refining. Funds raised by the tax would then be “used to provide rebates/refunds to California taxpayers impacted by high gas prices.” corresponding a press release from Newsom’s office.

“Crude oil prices have fallen, but oil and gas companies have pushed prices up at the pump in California,” Newsom claimed in a statement. “We will not stand idly by while greedy oil companies trick Californians.”

California Gasoline Price Inflation

A customer pumps gas into his car at a gas station on May 18, 2022 in Petaluma, California. ((Photo by Justin Sullivan/Getty Images)/Getty Images)

The average price for regular gasoline in California on Friday was $6.29. corresponding AAA. This price has increased by 11.3% versus the average price of $5.58 a week ago. Meanwhile, the average price of regular gasoline nationwide on Friday was about $3.80.

GAS PRICES MOVE IN DIFFERENT DIRECTIONS DEPENDING ON WHERE YOU ARE: GASBUDDY ANALYST

Phil Flynn, a FOX Business associate and senior market analyst at Price Futures Group, said such a windfall tax would “further discourage investment in an industry that desperately needs capital to stay in business in an increasingly hostile government environment.” “. he said.

In April 2021, Newsom signed an executive order aimed at stopping oil Mining in California by 2045. Recently, in August, the California Air Resources Board moved require all new vehicles in the state to go electric by 2025, a policy the governor had previously requested from regulators.

Governor of California Gavin Newsom

California Gov. Gavin Newsom (D) is seen in the rotunda of the US Capitol after meeting with Speaker of the House Nancy Pelosi, D-Calif., Friday, July 15, 2022. ((Tom Williams/CQ-Roll Call, Inc via Getty Images) / Getty Images)

“There is this misperception – created in part by Politician — that energy companies are somehow making too much money,” Flynn told FOX Business. “The truth is that their profits are higher than they have been in the past, but they don’t put into perspective how much these companies have to invest to bring the offering to market, and it doesn’t take into account government regulations that require that.” have restricted supply, which has also led to an increase in prices. It also doesn’t take into account that historically, most of these energy companies were losing money just a few years ago.”

Flynn told FOX Business the windfall tax Newsom was asking for was a “tool to shift the blame onto them.” oil companies “They’re just trying to do their job and supply the market well.” It would limit supply and push prices up in the long run, he said.

Governor of California Gavin Newsom

California Governor Gavin Newsom unveils his proposed 2022-2023 state budget during a press conference in Sacramento, California on Monday, October 1, 2022. (AP Photo/Rich Pedroncelli/AP Newsroom)

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While a windfall tax “might sound nice to the average person,” Flynn said, it would actually also reduce incentives and investment for oil companies and “choke off” their long-term viability. It could also affect people 401(K)she argued.

“If these companies aren’t making a profit, then who is investing in their oil stocks?” he said. “And if you have oil stocks in some part of your 401(k) — whether you know it or not, most Americans might not even know it — they’re taking money out of your 401(K) to pay for their bad policies, because those stocks aren’t going to do as well.”

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