.comment-link {margin-left:.6em;}

Sunday, April 27, 2008


The Russian Oil Taxes…… Ouch!

"It's never easy to find $1 trillion in investment capital, but the Russian government has made it hard for its oil industry to attract even a small part of that capital. The Kremlin has structured taxes so that most of the extraordinary rise in oil prices flows into government coffers, not oil-company profits.
When oil rises above $27 a barrel, the Russian government takes 80% of any additional revenue in taxes. That means at $67 a barrel, an oil company gets just $8 more a barrel in revenue than at $27. If the price climbs to $107 a barrel, the oil company's revenue increases by just $16 a barrel from what it was at $27 a barrel.
That may delight U.S. consumers who believe oil companies are making obscene windfall profits from soaring oil prices, but it hasn't made companies eager to sink their money into developing new oil in Russia.
The production decline in Russia would be serious enough if it were an isolated problem. But it's not. The same conjunction of geology and geopolitics is crimping production in Nigeria and Mexico."

the link to full article

This was an excerpt from a recent article link on the MSN website. Jubak was talking about how oil will go to $180 a barrel and most likely stay there. The most interesting part of the article I thought was this part. It’s hard to imagine that the Russian government has the tax system setup this way to really suck the life out of the oil industry not to mention the potential investors. Looking at it from a Power and Prosperity point of view we can clearly see the predation by the government. How will the oil industry grow and prosper with a government that takes 80% of the revenue? Most of the “greenies” here in America talk about getting off the dependence of oil. Over there the people should be talking about getting the government off the dependence of oil for revenue!

Add the money they bring in from the oil industry predation to the corruption and you get the Russian government. Wow, it’s so easy to see what Olson is talking about in Power and Prosperity. This could be one place the Russian government could fix to increase oil production and revenue for the firms and also increase investment. If the Russian government takes this amount in taxes from the oil industry, imagine what it takes in other industries. We do hear of the Russian come back, but imagine what it could do without this predation by the government.

Do you think the Russian government is acting in this regard as a stationary bandit or as a roving bandit?
Post a Comment

Links to this post:

Create a Link

<< Home

This page is powered by Blogger. Isn't yours?