The surgeon general first concluded that cigarettes caused cancer and other diseases in its historic 1964 report from 1976 to 1993. Six independent studies found smoking accounted for between six and eight percent (6-8%) of U.S. healthcare costs, which amounted to more than $50 billion dollars in 1993 alone. To recover these costs, states began to sue the largest cigarette manufacturers: Philip Morris, Reynolds Brown Williamson and Lorillard.
In 1998 all 46 states, four territories along with Puerto Ricco and the District of Columbia entered into a master settlement agreement with the cigarette manufacturers. It was the largest civil litigation in U.S. history. To date over
$168 billion dollars has been paid to U.S. states and billions more will be paid in perpetuity. These payments are not just part of the American tax code. Taxes on tobacco are found all over the world. It’s known as an excise tax in the national tax code and they are enacted on goods like tobacco, alcohol, gasoline, and even airline tickets.
Since 1998 cigarette companies have paid over 1.6 trillion dollars to governments around the world. The chart you’re looking at right now shows the actual excise taxes paid by cigarette companies. Government rakes it in with various taxes still to this day. Each year cigarette companies pay each U.S. state and territory a lump sum culminating into a
total payout of almost $7 billion dollars annually. It has been an enormous source of tax revenue for the governments.
Post-pandemic governments are going to require new alternative sources of tax revenue. The politicians will appear to try to pay back some of these multi-trillion dollar stimulus packages. A likely source of tax revenue in the United States and abroad, one that would meet very little resistance today, is through a carbon tax. If we think about politicians running most of the large developed world, the tax for the green agenda will be in full force.
Carbon taxation continues to be a focal point of discussion among all major nations. So is it possible the green socialist governments make the oil companies pay for greenhouse gas emissions? The world has known about greenhouse gas emissions for decades. A famous 1982 internal memo from Exxon scientists predicted the world would hit CO2 concentration of 415 parts per million and a global temperature increase of 1 degree Celsius last year. CO2 levels reached 409.8 parts per million while temperatures around the world have warmed 1 degrees Celsius. Royal Dutch shells greenhouse effect working group from the same 1980 era concluded similar results as
Exxon.
But are the oil companies truly at fault? I do believe the governments recognize, at least behind closed doors, that fossil fuels played an integral role in the world development and globalization up to this point. No question. We
would not be where we are today without oil. But what’s next and what is the right thing to do from here? This is the agenda going forward, whether you like it or not.
The price companies pay for emissions going forward is certainly up for debate and a hot topic at all political debates
according to data from the climate watch in the world resources institute. Oil and gas and petrochemical production account for about 3.6% of global greenhouse gas emissions. For comparison, iron and steel production account for about 7.2%. Transportation, road, aviation, and the marine, the big ones that people forget, account for 16.2% of greenhouse gas emissions.
So while oil and gas producers certainly should be held accountable for their share of emissions, the easy, low-hanging fruit is to go after the big oil companies. After all, it’s not like the tobacco farmer was on the hook for billions of dollars when they grew the tobacco. In the united states it’s been loosely discussed starting at about $15-25 per ton tax on greenhouse gas emissions.
Treasury secretary elect Yellen is pro-carbon taxation. So is Biden. So is Kamala Harris. So is almost every Democrat. Being a PHD economist who also ran the U.S. Federal Reserve, Yellen will understand that the government
needs to find alternative sources of revenue. A carbon tax fits that bill.
In Canada, our carbon tax currently is $20 per ton and will rise $10 per ton annually until it reaches a $170 per ton in 2030. In Europe it’s every country for themselves with tax policies ranging from pennies to over $125 per ton.
How much greenhouse gas do oil producers emit? Surprisingly as an industry, oil and gas producers, when you include the refineries when compared to steel, don’t actually emit a significant amount of greenhouse gases. Steel, for example, emits over seven percent (7%) of global greenhouse gases. Oil and gas extraction emits under four percent (4%).
Given the Green Socialist agenda that the first world has now gone, expect all extraction and manufacturing
industries to pay a price for pollution. What was theoretical logic just a few short years ago, is now law. In many nations around the world, what you’re looking at right now is a chart of major oil producers and their annual GHG, which is the greenhouse gas emissions divided by total production in terms of barrel of oil equivalent, BOE . You know GHG per BOE produced.
These 14 producers account for about 65% of U.S. oil production. It is a reasonable barometer for emission levels. The chart you’re looking at is those 14. The top, essentially the top two thirds of U.S, production, on their greenhouse gas emissions for barrel of oil equivalent. The next chart that we have up is the actual major integrated producers around the world. So you’ll see Saudi Aramco on the far left and Exxon’s the largest on the far right. Suncor is Canada’s largest oil producer.
But something needs to be disclosed here. Each company is responsible for their own internal GHG numbers.
So Saudi Aramco on the far left is reporting numbers perhaps at a different rate or using different levels
than Exxon. Maybe, maybe not. I just wanted to make that disclosure.
Integrated companies produce crude oil, refine it through their own refineries, and sell finished products like gasoline and jet fuel. So it should be expected that their emissions footprint is much larger on an oil production basis, which it is. Putting a value on carbon in the oil gas industry is going to be pretty simple.
And this is what you need to take home. Emitters will pay a per ton of GHG levy and I do see the Green Energy
companies getting net green credits, which can be offset or sold into an exchange. I am sure some of you think that this is a [ __ ] tax and it will bankrupt the oil industry. It won’t, but it is going to change oil production dynamics.
This tax will start to move high cost and high emission oil offline and make low cost, low emission oil more valuable, and global emissions would drop. There will be ways to play this and profits could be enormous.
