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Totally French?

This week, French petroleum giant and Motley Fool Income Investor pick Total SA (NYSE: TOT  ) , along with BP (NYSE: BP  ) , came under fire from the French Government. According to the French Finance Minister, oil companies are just making too much money, and if they don't lower the price at the pump, the government will step in and impose a windfall tax on oil profits. In response, Total and BP agreed to reduce prices by .02 euro per liter or 9 cents per gallon for diesel and .03 euro per liter or 14 cents per gallon for unleaded gasoline -- or as the French call it, l'essence.

Of course, the essence of the story isn't about windfall oil profits -- it's pure politics. With the French paying around $7 a gallon for gasoline, one can certainly imagine the sans-culottes marching with pitchforks to the capital. In 2000, they did the modern equivalent when truckers and farmers, protesting high fuel taxes, blocked access to French refineries and caused a temporary fuel shortage. The government learned from the experience and is hoping to shift the blame to the companies -- and hoping that consumers will ignore the petit inconvenience that taxes are responsible for the majority of the $7 price tag.

It turns out that beating up on oil companies is not uniquely French. Last Wednesday, Sen. Byron Dorgan (D-North Dakota) introduced the "Windfall Profits Rebate Act of 2005." Under his proposal, oil companies would face a 50% tax on windfall profits -- defined arbitrarily as the portion of the price of a barrel of oil that exceeds $40 -- unless that money was invested to build new oil exploration or refining infrastructure. While members of the Fool community can debate the merits of the proposal on the Politics of Energy discussion board to their hearts' content, I'm willing to bet that the Republican-led Congress and the Bush administration won't spend too much time on it. My prediction: This legislation is DOA.

Even so, one may worry that governments around the world will line up to extract profits from the oil business. In the short term, I'm sure there will be plenty of bluster from politicians seeking to score political points. Yet governments have had a love-hate relationship with the oil industry for over 100 years and, over time, government actions have done little to diminish investor returns. Despite their repeated accusations of ill-gotten gains, governments are acutely aware of how important the oil industry is to the modern economy. Therefore, it is doubtful that any significant legislation will pass, and the companies that have the oil, the refineries, the pipelines, and the companies that develop technology to extract oil from difficult places will do just fine in the end.

Have a gas! Click on this related Foolishness:

Total SA is aMotley Fool Income Investorpick. For a 30-day free trial, clickhere.

Robert Aronen owns shares of none of the companies mentioned and refrains from making any jokes about frog legs, snails, or goose liver. Please feel free to share your comments with him at

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