An energy windfall tax on exactly what now?

There are calls for a windfall tax on the “excess” profits being made by energy companies. This is, of course, ludicrous. Taxing supply at a time of dearth really is not the way to go about things.

However, there’s a subsidiary point to be made here. Which energy companies should be taxed given that all are making “excess” profits?

North Sea oilwells should be taxed more heavily and so should the production of natural gas. Energy companies are making record-breaking profits from the sale of hydrocarbons that lie in the deep water that surrounds Britain and that should shame the industry when the people paying the highest price are the poorest in society.

It should shame them into willingly parting with some of the gains, especially when the price of oil and gas is dictated by global markets that are driven at the moment largely by the conflict in Ukraine. These are not super-profits that can be attributed to the ingenuity of their staff or foresight of company directors.

Every single part of that analysis can be applied to - just as an example - the offshore wind industry. We can even check this. Varied new such fields gain access to guaranteed prices from contract for difference arrangements. Those new fields are not, as yet, signing up to those CfDs because the open market price is higher than they would gain from those guarantees.

It’s logically possible to stand where we do. The entire idea is absurd. We positively lust after people attempting to make those “excess” profits by developing energy sources which can provide the juice we desire when other sources fail us. If the profits arrive then they’ve done us a service by spending their capital on covering that lack of energy from those other sources. If the dearth does not arrive then they don’t and, ah well, so, that’s capitalism, the profits don’t arrive.

It’s also possible to allow the green eyed goddess to determine behaviour and demand that swingeing taxes be applied to anyone who has the temerity to make a decent profit. But the point we think it important to note is that if society is to do the second then it is indeed everyone making those stonking profits from energy supply that should be so taxed. Yes, that includes the political favourites of wind, solar and so on. If profits are Bad, M’Kay, then it is profits that are Bad, M’Kay?

Windfall taxes are an idiot idea but such on the energy sector that don’t in fact cover the energy sector would be vile.