In the middle of his Reader Mailbag for the week^[a], Trent over at The Simple Dollar writes about “massive” profits by Big Oil:

Let’s say that we then put a windfall tax on Exxon and siphon away some of that profit, driving their profit down into the 4 cent range. Investors will look at Exxon and see something that they should pull their money out of. Very quickly, Exxon stops having the money necessary to get fuel to you at all. The infrastructure breaks down, no one has the capacity to pull off that large conversion of oil in the ground to gas at the pump, and gas goes ballistic in price. Since there’s no real alternative available, the United States would be hammered.

His entire answer is really worth reading. I’ve always looked at the idea of a “windfall profit” tax on oil companies to be stupid because the tax would simply get passed on to the consumers — we’d pay every penny of the tax. I hadn’t stopped to consider what such a thing would do to investments.

1. LAST week, that is. Sorry; this one’s been written and waiting to be posted for a while — as has the one that’ll be coming up tomorrow. [↩]