What’s Money Map’s “‘Reverse Oil Tax’ that Pays YOU, Not the Government?!”

Deciphering the teased "How to Cash in on the $3.82 Per Barrel 'Reverse Oil Tax'"

Everyone hates taxes. Some of us don’t mind them as much as others, of course, or consider them a reasonable contribution toward common goals, but on April 15th no one who has to mail in an extra check to cover their taxes enjoys it.

So the idea that you can redirect a tax, and get the tax money coming to you instead of to the gummint, well, that’s naturally quite appealing. That’s the pitch from the Money Map Report folks … and if you subscribe to their newsletter, they’ll tell you how to collect your “reverse oil tax.”

Subscribe if you want, friends, but let us tell you what they’re really talking about first — then you can decide rationally and calmly, without the lure of hot secrets to be revealed (you can also see some reviews of the service from other Gumshoe readers here, or in the column to the right of this note). This pretty much functions as their “entry level” newsletter at Money Map Press, like almost all publishers they use this general, broad based letter to bring in new paid readers who are willing to pay a bit for advice, since folks who are willing to pay even a little bit for advice become a wonderful hunting ground for publishers who want to urge you to pay a bit more for “better” or more exclusive advice.

Sorry, I got off target again — what was our mission today? Right, to figure out what this “Reverse Oil Tax” is that they’re pitching. Here’s how they open the ad to get your attention:

“Over the next several months, the nation’s largest energy companies will begin paying a brand-new $3.82 per barrel oil surcharge – or approximately $47.7 million each and every month.

“That’s 712% higher than the current excise taxes levied by the state and Federal governments, on average, on a gallon of gasoline.

“And for the first time in history, this HUGE new surcharge, or ‘reverse oil tax,’ is NOT going to the Feds. Or to State governments.

“Instead, it’s flowing into the bank account of a small limited partnership – a partnership that controls the only existing pipeline capable of relieving the massive GLUT of crude oil now accumulating in storage tanks in Cushing, Oklahoma.

“And here’s the shocking twist few people know about:

“If you act very quickly, you can lock in YOUR share of the regular “reverse oil tax” payments for the next DECADE at least…”

A fair amount of that is poppycock, to be sure (especially the “first time in history” bit) — but there is some reality there. Folks who are accustomed to investing in Master Limited Partnerships that own oil pipelines probably recognize that that’s what we’re talking about here … let’s get a few more details from the ad to flesh it out:

“What if the oil companies were legally obligated to pay a brand-new $3.82 per barrel ‘energy tax’ that is being levied beginning May 17 – and a percentage of the revenue was passed from the limited partnership on to you in regular payments?

“Finally, what if a small limited partnership had locked in guaranteed contracts for this ‘reverse oil tax,’ all with the government’s approval, for 10 long years?

“It would be an amazing deal, wouldn’t it?

“And here’s the kicker: This unprecedented, once-in-a-lifetime opportunity is happening right now, as we speak.

“Already, a small group of savvy insiders have cashed in with regular payments before the upcoming ‘reverse oil tax’ has even gone into effect!”

Don’t worry, that bit about it “beginning May 17” doesn’t mean that it’s too late to catch on with this “top secret” deal — though I’m afraid this was also one of the more heavily-covered pipeline deals in the financial media, second only to the Keystone XL political debate, so it ain’t exactly a “top secret” anymore.

Why was it so heavily covered? Well, because this deal — though relatively small for the large companies involved — tells a story … and we all love stories. The tale is that US oil production in North Dakota and Canadian production has grown so fast that it has messed up the oil transportation network … pipelines were set up to bring imported oil from overseas in through Texas and Louisiana, not to bring crude oil from the Bakken or the oil sands down to the Gulf Coast where most of the refineries are. That increased production of oil from new places in North America has led to a glut of oil in Cushing, Oklahoma where NYMEX oil prices are set (ie, when they trade oil on the NY Mercantile Exchange, which is the “West Texas Intermediate” oil price that you hear about on the news, the prices are set for delivery in Cushing). So oil prices there are relatively lower than international prices. International prices are set off of a benchmark called Brent Crude, which is North Sea oil but has been widely adopted to mean all seaborne oil that gets traded and delivered by tanker. Oil is largely fungible, meaning one barrel is more or less the same as another (there are variations, with refineries set up to handle specific types, and that messes up the liquidity of the market a bit, but we’ll ignore that) — and since it’s fungible and easily transported by a massive global network of tankers, import and export facilities, and pipelines, you would expect the major seaborne price to be roughly the same as the price in the heart of the world’s largest oil consumer and importer.

A part of the reason why that’s not the case is the roughly 500 miles between Cushing, Oklahoma and the refineries in Louisiana and Texas that are near the Gulf of Mexico, a gulf of space that is underserved by pipelines (or at least, underserved by pipelines that move stuff South — pipelines don’t generally have two lanes, they move in one direction).

So the big story that caught the attention of investors who are interested in this “gulf” between Brent Crude prices and WTI prices was that one of the pipelines that was set up years ago to move oil from the Gulf import terminals into Cushing is getting the switcheroo — they’re changing the direction, so that more oil from Cushing can instead move to the Gulf, so theoretically the refineries who might have had to import Brent Crude at $100 using a Gulf terminal can now buy WTI from Cushing instead for $86 and move it to the Gulf via pipeline.

And yes, it’s already happening — it’s a story today, too, in fact, because the first load of oil that was put into that pipeline (it’s called the Seaway Pipeline) 19 days ago just arrived today at the terminal in Texas (interesting math: that means the crude oil took almost three weeks to travel 500 miles — don’t know if that’s the normal speed or is a startup thing, but that’s just slightly over one mile per hour). That’s obviously not enough to immediately relieve the price imbalance that’s largely caused by huge inventories in Cushing, but just the announcement a few months ago that this would happen (and that the government will also likely approve the southern part of the Keystone pipeline extension to begin construction soon, driving more Cu