Do you trust the Govt. to do you right?

[MSTRS:Me]

Yep,you got Europa at the same garage that sold you a Hillman.Europa disapeared along with Ipana and Rinso....

Rinso, Rinso, where you gonna go-e-o....

[Jamezo]

Hmm. I think most here are fundamentally misunderstanding the issue.

As far as pricing goes, it's not about politics, it's simple economics.

Hypothetically speaking, if a viable source of oil was discovered here, and sucessfully exploited, then if the owner of the oil (ie. the Crown) wanted it to be sold, then by neccesity it would have to come through the existing networks of refining and distribution.

This means that even if the oil was sold at a lower rate, the pump prices would not be affected significantly, the profits just being taken up by the refiners/distributors.

Thus market forces dictate that the oil is sold at the rate that it can be imported at.

Theoretically, we could have a SOE refining/distribution system, which would allow lower cost fuel to be provided to the consumer. This is a viable option in net oil exporting countries such as Venezuela. Obviously not going to work here.

So the only way NZ citizens could see any benefit from any resource like this is revenue from oil sales at market rates. Which is neccessarily filtered through the state. Queue debate on government expenditure.

What I see as a more pertinent point is what role private corporations would play in the exploitation of a resource like this.

[Winston001]

So the only way NZ citizens could see any benefit from any resource like this is revenue from oil sales at market rates.

What I see as a more pertinent point is what role private corporations would play in the exploitation of a resource like this.

While the Crown "owns" the oil, (as it does gold, coal etc), the Government has no expertise in oil prospecting. So the only people who are going to make the effort to drill and pump are private businesses who are experts.

And they aren't going to do it for fun. Any more than Heritage Gold etc mine for fun. The oil exploration companies get the oil, pay a royalty to the government, sell it whereever, and pay tax on the profit.

Make no mistake. This would be great for New Zealand as a whole. Alaska for example has no state taxes because of oil royalties. Venezuela and Mexico have cheap petrol because their governments pay a subsidy to the petrol companies (which run at a loss). But their oil is the same price as everywhere else if you take the subsidy out.

[Timber020]

Uncle Klark is no prize, but would you rather have Auntie brash?
All politicians are prats, I dont trust them but I trust those who arent in power at the moment less than those we have now.

[Skyryder]

Just be greatfull you don't live in Dilli or the middle east or some other godforsaken place that we call earth. We all struck the jackpot being born in here/living here or whatever.

Skyryder

[NhuanH]

Just be greatfull you don't live in Dilli or the middle east or some other godforsaken place that we call earth. We all struck the jackpot being born in here/living here or whatever.

Skyryder

That is the best post I have seen amongst all the whining I've seen here. Context and perspective is great huh?

Flacid, you don't like understanding the subject matter of your rants very deeply eh?

[Jantar]

While the Crown "owns" the oil, (as it does gold, coal etc), the Government has no expertise in oil prospecting. So the only people who are going to make the effort to drill and pump are private businesses who are experts.

And they aren't going to do it for fun. Any more than Heritage Gold etc mine for fun. The oil exploration companies get the oil, pay a royalty to the government, sell it whereever, and pay tax on the profit.

However, the giant international companies use a little (legal) scam called transfer pricing. That is they sell the oil to their parent company at the exact amount that it costs them to pump and ship the oil. Therefore there is no profit and no tax payable.
The parent company sells the oil on one of two main the international markets, Brent or North Sea, and gets the full market price. The parent company then sells the oil to the refinery at the the full market price. The refinery sells the refined product at a price that exactly matches the purchase cost plus refining costs with only a tiny markup. These refining costs include a large transfer payment to the parent company for management costs and expertise, so the refinery pays no tax.
Then the retail arm of the company buys the refined product from the refinery also at full price, and so can justify the price charged to consimers.

Note that the parent company owns the oil and pays a royalty, but no tax. The parent comapny owns the refinery, and the retail arm, so controls prices and costs at every step. Lots of money is transferred to the parent company, but very little profit. Profit is finally declared, and tax paid in the country that the parent company has its head office registered.

Did I hear "Tax Haven"?

[placidfemme]

Flacid, you don't like understanding the subject matter of your rants very deeply eh?

And why do you say that? I don't know much about polotics at all. I've only recently (like in the last year or two) actually started to realise what all this politics crap is all about (in Zim if your disagree with the govt. you disapear... so not much point in knowing anything about politics).

I see/hear something that I don't fully understand. I post it here to get other peoples opinions and learn more about the topic. Sometimes I walk away thinking/feeling the same way as I entered the discussion. Other times, i learn a lot and walk away with a different opinion. Which is my right anyway... So if you go back to my first post in this thread... you may (most likely not) notice that I asked a question and not a rant.

Besides, if you don't like my threads you should write to uncle helen and complain, I'm sure she'll care heaps for your concerns.

your dismissed.

[placidfemme]

While the Crown "owns" the oil, (as it does gold, coal etc), the Government has no expertise in oil prospecting. So the only people who are going to make the effort to drill and pump are private businesses who are experts.

And they aren't going to do it for fun. Any more than Heritage Gold etc mine for fun. The oil exploration companies get the oil, pay a royalty to the government, sell it whereever, and pay tax on the profit.

Make no mistake. This would be great for New Zealand as a whole. Alaska for example has no state taxes because of oil royalties. Venezuela and Mexico have cheap petrol because their governments pay a subsidy to the petrol companies (which run at a loss). But their oil is the same price as everywhere else if you take the subsidy out.

Ok so pretty much the govt has nothing to do with the oil other than granting permission to the oil/petrol companies to extract the stuff. Which in sort answers my question to the point that really the govt has little to do with it. *learns something new everyday*

So now that I know we won't be getting cheaper petrol/oil prices regardless, how else would this benefit the average NZer?

[Winston001]

However, the giant international companies use a little (legal) scam called transfer pricing................

Note that the parent company owns the oil and pays a royalty, but no tax. The parent comapny owns the refinery, and the retail arm, so controls prices and costs at every step. Lots of money is transferred to the parent company, but very little profit. Profit is finally declared, and tax paid in the country that the parent company has its head office registered.

Did I hear "Tax Haven"?

Good post, you clearly know your stuff. Just for clarity, Shell resides in Holland for tax, BP in Britain, Chevron, TexacoMobil, and ConocoPhillips are all US registered, and Total resides in France for taxation. None of these countries are tax havens.

But you are absolutely right to say that oil companies manage pricing for greatest tax efficency. Governments are on to this and make sure they get their whack. There is a constant tension world-wide between corporate accountants and tax officials.

Incidentally what you describe almost happens here already with the Tiwai Point aluminium smelter. Rio Tinto (the ultimate owner) ships bauxite from Dampier, processes it here, tries to buy the aluminium back at cost, and takes it away. Theoretically the New Zealand taxpayer should get nothing. But the government was onto this decades ago so New Zealand Aluminium Smelters (owned by Rio) is forced to price on the world market (not sell at cost) thus making a profit and paying tax.

Ultimately if any oil co was silly enough to try and operate at cost within NZ, our government could nationalise the field and operate it.

[Jamezo]

Ultimately if any oil co was silly enough to try and operate at cost within NZ, our government could nationalise the field and operate it.

You think they'd have the balls?

[Winston001]

Ok so pretty much the govt has nothing to do with the oil other than granting permission to the oil/petrol companies to extract the stuff. Which in sort answers my question to the point that really the govt has little to do with it. *learns something new everyday*

So now that I know we won't be getting cheaper petrol/oil prices regardless, how else would this benefit the average NZer?

Not quite. The Crown owns all minerals. For example, Solid Energy (which is huge), mines coal, and is owned by the government. Thats you and me. All profits go to the government.

On the other hand, Oceania Gold is a public company on the stockmarket. They mine gold with the permission of the government. They pay a royalty on every ounce of gold to the government. They also pay tax on profit. So we still benefit by letting someone else do the work. The difference is that a part of the profit goes to the shareholders.

If oil is discovered, the government could pump and sell it. But we are a tiny country and can you imagine the bureaucracy of setting up a state owned oil producing business?? Possible but unlikely.

So whoever pumps the oil pays a fee (royalty) per barrel to the government plus tax on profit. Assuming that is a lot of money, our personal taxation could be reduced. More money for schools and hospitals. Alaska doesn't have any state tax at all. NZ would be massively better off - just look at Britain and the wealth generated by the North Sea oil.

[Swoop]

As everyone has already said NO one trusts the government!!

I trust this government..... to make a complete balls-up of everything they do!

Although an Oil find is great, do you think for a minute that the Greens would even allow this to happen??

The greens don't own the oil, the maoris do. They had traditional use of oil to lubricate their throwing spears with. This is why thay had a massive range of 300yards.

I'm not even going to mention their uses for cooking with oil....

[Wolf]

The current government are lying thieving scumbags with their own private agendas and I trust them not at all.

And this differs from all previous governments - and any conceivable future governments - in what respect?

No matter who you vote for, the government wins. Not once have I heard a politician say "Thanks for electing me, I really think the PM's salary is too high, especially since I'm a millionaire in my own right, so I'll cut the salary down which will let me reduce taxation by 13% and still commit extra funds to community projects."

Never will hear it either - firmly opposed to halucinogenic drugs, me!

[placidfemme]

So whoever pumps the oil pays a fee (royalty) per barrel to the government plus tax on profit. Assuming that is a lot of money, our personal taxation could be reduced. More money for schools and hospitals. Alaska doesn't have any state tax at all. NZ would be massively better off - just look at Britain and the wealth generated by the North Sea oil.

It would be nice to get a tax cut due to this, but I still don't trust the govt. to do that.

*was hoping for real cheap petrol* lol