"Windfall" Profits

I'd say that John Cole is right and a "windfall profits" tax on oil companies is a pretty bad idea -- it doesn't really make sense to say that we're going to try to pass laws explaining exactly how profitable different kinds of companies should be. Now, "windfall profits tax to raise revenue" (Obama) is a better idea than "windfall profits tax to finance gas tax cut" (Clinton) or "gas tax cut paid for by magic" (McCain) but if you're really willing to hurt the oil companies in the name of the public interest what you really should be doing is raising the gas tax and rebating about half of the revenues to taxpayers.

Half is about the consumer share of the gas tax burden. Some folks will plow all of their rebated cash back into gasoline purchases (thus leaving things about where they were) but others will reduce consumption and use some of that money in other ways ways. Meanwhile, the remaining revenue raised can be spent on alternative modes of transportation. With that done, how profitable oil companies are will just be a question of how cleverly their executives adapt to a new policy environment. Something like BP's claim to be "beyond petroleum" is largely greenwashing, but in principle there's no reason why hugely profitable oil companies couldn't turn themselves into hugely profitably energy companies of another sort. The problem is the oil not the profit.