STWR - Share The World's Resources

Fred E. Foldvary, 12th December 2006

Land rent is recognized by enlightened economists as the supremely equitable and efficient source of public revenue. Rent is a social surplus, and tapping it involves no excess burden, unlike taxing productive activity.

One type of land commonly tapped for government revenue is the economic rent of material natural resources such as minerals and oil. Oil royalties from extraction, referred to as severance taxes, are important in petroleum-producing economies, including some states such as Alaska in the USA. There are also federal royalty revenues on oil via leasing rents in federal territory. Some 2600 companies paid federal royalties of $12.8 billion on 27,800 leases in 2005.

In the US, the Minerals Management Service (MMS), a bureau in the U.S. Department of the Interior, is responsible for monitoring the oil companies that operate in federal territory and collecting the revenue. The MMS has been lax in tapping the oil rent.

For Part 1, see Russia attacks the West's Achilles' heel

Russia has set the agenda for the global transition to an entirely new model of international energy security designed to address intensifying concerns, especially those of the rising East.

In the November 2006 election in California, a proposition would have levied a tax on oil production and prohibited companies from passing on the tax to the buyers. This proposition was numbered 87 in the multi-election series of measures proposed to the voters. If passed, the revenues would have subsidized research and enterprise on alternative energy source such as wind and sunlight. Voters defeated this tax 55 to 45 percent.

What is special about oil, that it should be singled out for a tax? Oil in the ground is a natural resource, a type of land. The market value of the oil, after subtracting out the normal costs of exploration and production, is an economic rent, a surplus that can be tapped for public revenue just like other types of land rent. Tapping this economic profit does not hurt enterprise, production, and investment, and does not change the price or quantity of production. That is the nature of a surplus, which is in effect a "free lunch."

Yes, contrary to the popular saying that there ain't no free lunch, there really are free meals in the economy, various kinds of "surplus." There is a surplus to consumers when they buy stuff at lower prices than the most they would pay. There exists a surplus in production, the price minus the costs of producing that extra amount of stuff. Most of this surplus is land rent, so it should be called the "non-producer surplus," as the title holders did not produce this land. But economists don't want this to appear too obvious, so they turn it around 180 degrees and gleefully call it a "producer surplus." Some naive graduate economic students don't understand the joke, so they really do believe it is a surplus that goes to the actual producers.

9th November 2006, Thalif Deen, Inter Press Service

If the world's growing water crisis remains unresolved -- depriving clean water to more than one billion of the world's six billion people -- it will jeopardise the U.N.'s longstanding battle to reduce global poverty, hunger and disease by its targeted date of 2015, the U.N. Development Programme (UNDP) warned Thursday.

Multinational oil companies have reaped record profits the last two years due to the high oil price. But behind the scenes, they are playing a longer game. Civil society should learn from their approach.

Hovering around $70 per barrel – the highest level since the late 1970s[1]– the oil price has sparked focus on the theme of “energy security”, notably at this July’s G8 meeting. But this term is a misleading one, a cover for companies to take long-term control over oil and gas resources, at the expense of genuine security.

What is needed is to replace it with a genuine concept of energy democracy.