February 19, 2013 · 8:29 pm
How much do oil companies save under Venezuela windfall tax cut?
So Venezuela’s legislature today approved the cut in the “special contribution for exceptional international oil prices” or whatever they call it. Windfall tax, in effect. And people wonder, how much do the oil companies save?
I don’t know, since when you save money on one tax you often end up paying more on some other tax. But here’s what the chart looks like on the windfall prices tax, which isn’t a tax but a “special contribution” (meaning it goes right to the presidential slush fund, rather than being shared with state and local governments):
Windfall tax take at different oil prices, click for full size
Windfall tax take at different oil prices, click for full size
This assumes that the “budget” oil price is $58 a barrel. Under the old rates, at $70 a barrel, a company would pay $2.40 to Fonden in “special contributions.” Same in the new rates.
But go up to $100 a barrel and the old rates meant a $27.40 contribution, while the new rates require a contribution of only $20.40. According to my math, anyway, which is based on Oil Minister Rafael Ramirez’s comments in a statement yesterday.
Then go up to $110 a barrel and the difference grows to $7.50 per barrel, and stays there — from there on up, the difference is always $7.50.
Several of the big joint ventures in Venezuela are aiming for output of 200,000 barrels a day. The private partners generally own 40%, so they can count 80,000 barrels a day as their production. At that output, a difference of $7 a barrel works out to $204.4 million a year ($204.96 million in leap years). And now you know.