Investors in South African integrated energy firm Sasol
A government-appointed task team, packed full of people with PhDs, took one year to answer the following deeply nuanced question: Are the recent "windfall profits" of Sasol and other liquid fuels providers cyclical, or permanent? I am not kidding. What part of cyclical don't the good doctors understand?
If you believe that oil prices have reached a permanently high plateau, the last few days should have given you a bit of a jolt. The mere whiff of a housing-induced economic slowdown in the U.S. has been enough to take oil prices down by about $7 per barrel in a matter of days. Sure, I think we'll see $100 oil sometime in the not-too-distant future, but I wouldn't rule out $50 oil along the way.
I think what ultimately swayed the South African government was not a meditation on the Ricardian theory of economic rent, but instead a pragmatic consideration of energy security. This is the same banner under which Peabody Energy
Matters are a bit different over here in the U.S., where companies like ExxonMobil
Of course, there's a big difference between levying a windfall profits tax and removing a production subsidy. I don't believe a profitable endeavor should be subsidized any more than it should be taxed. So I'm not all that opposed to the House's recent effort to redirect tax dollars toward fledgling alternative energy technologies. Sasol could be a beneficiary of any moves toward subsidizing CTL in the U.S., which would be quite a reversal for a company so recently feared to be subject to the whims of its own government's taxation schemes.
For related Foolishness:
Who says it's a small world? Sasol is a Motley Fool Global Gains recommendation. To find the best companies to invest in wherever they do business, join Bill Mann and his team during a free trial to Global Gains.
More from The Motley Fool
Why American Outdoor Brands, Sasol, and Iovance Biotherapeutics Slumped Today
These stocks held down the stock market. Find out why.
Currency Fluctuations Hit Sasol, but the Company Has Its Growth Plans in Place
The South African energy and chemicals company continues to grow its profits despite the headwinds.
Sasol Sees Mixed Sales to Start 2017
The South African energy company's production and sales metrics were largely mixed.