Crude Oil Prices and Tax
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Trading Features / Strategies from Simon Denham of Capital Spreads.
Crude Oil is on everyone’s lips these days and politicians across the globe are falling over themselves blaming just about everyone under the sun for the dramatic rises. Traders, producers, terrorists, refiners, OPEC, the Oil companies...pick a name, any name.
Of course the real reasons for such high price levels can be placed firmly back in the laps of those self same politicians who have always seen the black gold as a safe, risk free, source of extra revenue. Lacking the balls to push through new refining capacity (the US and UK have not built a new refining plant for decades), in thrall to the Greens about searching for new sources from the wilder parts of the globe and, as with our very own Gordon Brown, adding such swinging taxes to extraction that companies simply ceased new exploration in many areas.
The oil companies can extract the oil, pay the local government its portion, ship it half the way round the world (any idea what a super tanker costs?), refine it, pay for the forecourt and all the salaries off everyone concerned and then sell it for around 30p a litre. Somewhat less than the bottled water from a supermarket that basically flows out of the ground in its final form. When you hear that the tax on a litre of petrol is 75% it is educational to look at this the other way round. The tax on petrol is 300pc of its finished product, in the pump on the forecourt, cost. Three hundred percent! No wonder OPEC appear somewhat bemused when they are blamed for the high cost of fuel. It is the breathtaking gall of it all that appalls this writer.
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Captain Darling is under pressure to cancel the pathetic little 2p “green tax” rise due later this year. In reality he should be looking at trimming the massive 90p that he already takes.
German and US politicians are seriously debating disallowing open trading in oil futures...Wow, what an amazingly stupid concept...Trying to stop the open market trading of a product that you yourself do not control is just so pointless as to be laughable. When the boot was on the other foot and oil was down at $12 at least OPEC did not threaten to withhold supply and Crude Oil continued to be freely traded. I can see the fledgling futures exchange in Dubai praying to God that the West makes such a foolish move as it could be the death knell for the various commodity exchanges in NYMEX, NYBOT, ICE and EUREX as producers start to wonder “where one product gets restricted, so can another. What happens when another crucial commodity gets squeezed?”
Gold rallied by over three times in the last few years but of course this just made everyone richer so it didn’t matter. Copper, Platinum, corn etc all up big time but nobody blinks the reason for this is obvious for two reasons. Firstly most of them are hidden costs making up just a small proportion of the price tag of a finished product and secondly none of them is taxed so highly as fuel and therefore does not put as much pressure on the government of the day to do something about it.
The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
Article provided / approved by Capital Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.
'Crude Oil Prices and Tax' edited by SD, updated 29-May-08
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