(1) What happens if XOM reorgs in the Cayman Islands (or Ireland, for that matter)? No longer a domestic oil company, and taxes paid to the USA drop substantially. How many $Bs does it take to make the move work?

(2) Assuming (1) doesn’t happen, the new taxes just makes it more expensive for domestic oil companies to get a barrel of oil out of the ground and the however-many gallons of gasoline it yields to the pump. But that doesn’t directly affect the price of gasoline or oil. XOM provides a small percentage (4%?) of the world’s oil/gasoline. They are price-takers, not price-makers. If their marginal cost to produce a gallon of gasoline increases, they’ll simply produce less (until mc = price).

Granted, all of the US producers producing less will affect global supply a smidgen, but foreign oil companies will be able to produce more to mostly make up the difference (the slightly higher price ekes out a few more gallons on the margin from vast majority of oil producers — the rest of the world).

(3) = 1+2 => lower domestic production, slightly higher price.

OTOH, a direct tax at the pump hits every single producer that sells in the US on every single gallon of gasoline, regardless of national origin.

(and it doesn’t transfer revenue from XOM to OPEC).

Taxes, subsidies, tariffs

Deadweight loss: The net loss in economic welfare that is caused by a tariff, tax, or other source of distortion, defined as the total losses to those who lose, minus the total gains to those who gain. Usually identified in a supply-and-demand diagram in terms of change in consumer and producer surplus together with government revenue. The net of these appears as one or two welfare triangles.

http://www-personal.umich.edu/~alandear/glossary/d.html