The words “oil crisis” bring the 1970s to mind for many of us, but a University of Iowa energy historian says America is in another oil crisis right now.
UI Professor Tyler Priest, who teaches a course on U.S. Energy Policy, says another echo from that bygone era is the renewed call for a federal windfall profits tax on oil companies.
Priest says such a tax was also passed by Congress late in the Carter Administration — in 1980 — and it didn’t work.
“Oil prices actually collapsed in the mid-1980s, so there really weren’t windfall profits to tax. So it didn’t generate a lot of revenue for the federal government,” Priest says, “and there’s some evidence to show that it actually reduced domestic oil production and increased our reliance on imports.”
Global oil companies are expected to report their profits this week. U.S. Senator Sheldon Whitehouse, a Democrat from Rhode Island, has introduced the Big Oil Windfall Profits Tax Act to address profits that are tied to the war in Iran. Priest was asked if such a tax would be effective this time around.
“It would work in the sense that profits would be taxed. I’m not sure what the mechanisms are in the new bill,” Priest says. “Any tax on domestic oil production would probably reduce investments in domestic oil, and there are a lot of uncertainties about what the effects of this would be.”
Back in the ’70s, conflicts and production cuts in the Middle East led to a quadrupling of petroleum prices, double-digit inflation, widespread gas shortages, and long lines at gas stations. Priest is fearful about where things are headed now, as the conflict in Iran approaches its fifth month.
“I definitely think we’re in an oil crisis right now. Diesel prices are skyrocketing. Gasoline prices are going up,” Priest says. “There doesn’t seem to be an end game for the war and the standoff over oil export routes from the Persian Gulf.”
During a Radio Iowa interview in May, Priest predicted it could be as late as December before prices at the pump would be back down to where they were before hostilities between the U-S and Iran started in late February. Priest says he’s sticking by the prediction.
“Oil markets are spooked. It’s clear. The prices are rising several percentage points a day at this point,” Priest says. “Unless there’s a diplomatic breakthrough soon, yeah, we’re looking at high prices through the end of the year.”
Priest’s latest book, “Offshore Oildom,” examines the political significance and controversies over U.S. offshore oil and gas extraction.
The post UI energy expert: Gas prices could stay sky high into December appeared first on KSCJ 1360.
