In a commodity-based world, there are booms and busts as the price of the commodity goes up and down. When the busts happen, companies retrench and sell off assets. In the boom times, shareholders win as the company makes more profits than normal or what was expected. However, governments look at the companies and see excessive profits and sometimes they will make political hay over the connection to the mythical person on the street and the excessive profits. What is a company and industry to do?
In an article by Sabrina Valle of Reuters, the European Union is trying to tax the windfall profits of the oil companies. According to Exxon’s chief financial officer Kathryn Mikells, the tax would cost Exxon $2 billion through 2023.
Exxon spent $3 billion on its oil refineries in Europe and suggested it would have to cut back on future projects if the tax went through. Chevron echoed Exxon’s comments.
Linking to dividend paying stocks, often times politicians will pick on companies that boom and conveniently what happened during the bust of the commodity price. The companies and the lobby organizations do a good job at ensuring the views of the industry are well known. If there is big money evolved expect the large PR companies to get involved because while the companies may be able to pay something, paying the windfall is too much and when does windfall go away?
There are more questions than answers, till the next time – to raising questions.