Daniel Yergin, chairman of Cambridge Energy Research Associates and author of the seminal history of oil, writes a thought-provoking piece in yesterday’s FT. It’s not that prices are soaring due to an increase in the demand, he argues, as much as that the oil companies are facing steeply increasing costs for bringing oil to market. He reasons, therefore, that

the impact of rising oilfield costs and the importance of encouraging investment need to be taken into account when considering a “windfall profits” tax or other new taxes. However attractive politically, the effect would be to constrain investment and to lead to lower production levels than would otherwise be the case.

Crude and blunt measures to help out the little guy at the expense of the big guy often bring more pain on for everybody. It’s an important lesson that never gets learned thoroughly enough.