Oil and Gas Law

Oil and Gas Law

Introduction

Petroleum, natural gas and other energy sources compete with each other in so far as they can satisfy the same needs, such as providing the source for energy generation. The use of a specific energy source against a competing one is driven by several considerations, including availability, price, technology, environmental impact, corporate strategies and consumers' perceptions. Domestic taxation systems that impose different tax rates on different energy products have an impact on the final price of such products and may therefore alter the competitive relationship that would otherwise exist among them. Energy taxation in the Organization for Economic Co-operation and Development (OECD) countries is particularly heavy on petroleum products, while other energies, such as coal and electricity, are less taxed and are often subsidized.

Varying levels of taxation rates levied on energy products may be aimed at reaching different policy objectives-such as raising fiscal revenues, influencing the current account balance, pursuing strategic or environmental plans-as well as complying with multilaterally agreed commitments, such as those deriving from the Kyoto Protocol. Varying tax levels may as well be aimed at protecting a specific energy sector (or product) against a competing one, often the protected sector (or product) being the only one existing at the national level. They may also be aimed at preserving the competitiveness of domestic sectors. Generally, taxation has proved to be an efficient economic instrument for tackling environmental problems; however, its main goal remains revenue collection to provide public goods and ensure wealth distribution according to societal objectives.

Petroleum-exporting developing countries have traditionally considered that the high consumption and excise taxes imposed by importing countries on petroleum products have the double effect of penalizing such products as compared to other energy sources, and undermining exporting countries' ability to derive income from their natural resources. The effect of such taxes may thus be inconsistent with policies aimed at promoting development in developing countries.

1968 Convention on Tax

(a) The 1968 Convention as amended shall not prevent a court of a Contracting State which is a party to a convention on a particular matter from assuming jurisdiction in accordance with that convention, even where the defendant is domiciled in another Contracting State which is not a party to that convention. The court shall, in any event, apply Article 20 of the 1968 Convention as amended.

321: (b) A judgment given in a Contracting State in the exercise of jurisdiction provided for in a convention on a particular matter shall be recognised and enforced in the other Contracting States in accordance with the 1968 Convention as amended.

322: Where a convention on a particular matter to which both the State of origin and the State addressed are parties lays down conditions for the recognition or enforcement of judgments, those conditions shall apply. In any event, the provisions of the 1968 Convention as amended which concerned the procedures for recognition and enforcement of judgments may be applied.')

The Energy Mix And The Substitutability Of Products

Cross-price elasticity of demand, as it will be discussed later ...