Tony K's Blog

First a disclaimer. I work for Chevron. Nothing I say here has been endorsed by Chevron, it is simply my opinion. I believe that Proposition 87 on the California Ballot in November 2006 is overall a bad idea. Most oil production in the United States and the world carries a "royalty." That is not unusual. California was one of the few exceptions. However, California has some of the stiffest taxation in the nation, which I suspect more than makes up for it. So this is, in essence, California enacting a new "windfall profits" tax. Is this good or bad then? Well the structure of the tax is such that the highest payments happen when prices are high. That kind of graduation is good. there is also a limit on the total amount that will be brought in, so the tax goes away at some point. That's fine in theory. Once a tax is in place, it often gets extended or rates changed. The royalty might result in fewer barrels reduced ultimately. It depends on prices and timing. Ther...

First off, if you drive a car that gets less than 20 MPG, you have no cause to protest high prices. You are the problem. The current high prices at the gas pumps are driven by factors that work all the way back to really basic supply and demand issues. People often say that oil is a finite, non-renewable resource. I'll buy the non-renewable part, but not the finite part. OK, oil is technically not infinite, but practically speaking we will never run out of oil. The issue is how fast can it be produced? Today the world is producing about 85MM barrels per day. By all accounts that is with all production going full out. Here's what will happen. When demand for oil and the world's ability to supply it are out of balacne, prices go up because demand is pushing the limits of supply capacity. Two things will happen in response. Consumers will make choices that will curtail their usage of enrgy--short and longer term structural changes; producers will ramp up efforts to deliver mor...