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February 28, 2011



Surely it depends whether it permanent or temporary (or as good as)? If the former then the country (as an oil importer) is simply worse off, and has to juggle with that at some point.

Also we still produce oil, we're now a net importer but only by about 300-400m barrels a day.


You're right, Matthew. We can't avoid the fact that higher oil prices make us worse off. What we can do, though, is smooth out the impact. So rather than the pain all coming this year, fiscal policy can be used to spread it out over several years. Our future selves can thus help out our current ones.
I'm not sure it much matters who produces the oil - whether the money goes to owners of a North Sea field or to a Saudi one is (for moy purposes) not significant.


Surely it matters? Not least the govt has more tax raising powers on domestic oil fields?

David Ellis

Tax on oil is the government taking a share of the profits. To cut this tax would dramatically cut the revenue raising capacity of the government which claims to be trying to pay off the `nation's credit card' and would stimulate the further importation of oil (further deterioration in balance of payments) which will have to be paid for by further loading the nation's credit card. A double whammy to the deficit.

Pehaps a better solution would be for the government to import the oil and sell it on and thereby pocket all of the profit in the difference between the wholesale and retail prices. It could then cut the price at the same time as increasing its income. A double positive.

Ralph Musgrave

I agree with Chris Dillow.

The Silent Sceptic

Does anyone have any idea where the optimal oil price for governmental revenue raising lies (in the Laffer curve sense)?

Clearly in the very short term we are prisoners to the oil price, but in the longer term our consumption would adapt. The question is at what point government revenue is maximised, and furthermore, does the current administration have an idea where this point is. And yet further, are they driving us towards it?

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