Against the Windfall Tax

Like Conor at the Liberal Conspiracy, I can’t really get behind this clamour for a windfall tax on oil companies. I would love to have a dig at Big Oil, but something grates.
Its not that I am like Tim Worstall, who has barrels of faith in the market to sort the problem out fairly. Oil extraction and distribution is a sort of cartel, not a free market. In any case, such a market takes time (maybe measured in decades or centuries) to do its ‘thing’, and in the meantime it is probable that excess profits will accumulate while everyone else is suffering from a recession.
No, my problem is that arguing for a windfall tax is surely another way of saying that you want to change the rules retrospectively.
Economists often argue that to change the rules, and to impose a windfall tax, simply breeds uncertainty in the market, and cause the oil companies to under-invest. Its an irritating argument against taxation, because it has an air of a threat about it: “don’t tax us, or we will mess up your economy”. In the case of a windfall tax, which everyone (even the oil companies) assumes will be a very rare occurrence, it is less believable than (say) the case of top-rate tax-payers. So I can see how the campaigners might discount this economic argument.
But leaving aside the economic risks that a windfall tax entails, surely changing the rules is simply wrong wrong wrong, no further discussion required? Imposing some kind of law (in this case, a tax law) retrospectively is the stuff of wild-eyed dictatorships, surely. Windfall taxes are short-cuts. An easy, lazy solution to a complex situation.
Play by the rules… and if you feel you must change the rules, do so only at the start of the game. If we percieve a problem with the way our country operates, its fine to legislate so that it doesn’t happen in the following tax year. Nationalise the oil companies if we must, or tax them at 99%. Whatever. Only this: we must to legislate for the future, not the past.
There’s a familiar saying, which goes something like “you can judge a society by the way it treats its most vulnerable”. Well, an alternative might be that we should judge ourselves by how we treat our most despised. The oil giants are certainly some of the most resented institutions in the country, but to subject them to anything other than the rule-of-law is not, I would suggest, cricket. Compass should leave the oil companies with this year’s profits, and get busy lobbying for a law that would redistribute future profits. That’s the right way a democracy should approach this problem.

Update 3rd September

The only counter argument that has piqued my interest has been that a large portion of the oil companies profits have arisen because of preferences in the system of allocating carbon credits via the European Emmissions Trading Scheme. However, while this is a definite argument for going after excess profits, I’m not sure it justifies doing so retrospectively, as a windfall tax would.