I am really tired of the pols and their henchmen, the media, doing hit pieces on the energy industry…they tell only one side, the socialists progressive side, that would have America become a third world nation, subserviant to the UN and others…it is time to make a stand and fight back with the truth…
Where do your gasoline dollars go?
April 30, 2011 | Posted by Ken Cohen
Many in Washington would like motorists to think the high prices they are paying at the pump these days are flowing directly into the pockets of ExxonMobil and other oil companies. This misperception helps fuel the demonization of “Big Oil” and the misguided notion that energy prices can be solved by raising taxes on the oil industry.
But the facts prove otherwise. Because of gasoline taxes paid by motorists, the government takes in far more money on a gallon of gasoline than an oil company does. How much more?
- Through the combination of state and federal taxes, the government collects an average 48 cents on each gallon of gasoline sold in the United States.
- Gasoline taxes are far higher in some states, such as California and New York, where motorists pay about 66 cents. Taxes are even higher on diesel, which fuels commercial transportation.
- By contrast, during the first three months of this year, for every gallon of gasoline and other products ExxonMobil refined and sold in the United States, we earned about 7 cents.
My point here isn’t to criticize gasoline taxes or their purpose. I just think that when it comes to addressing the rising price of commodities, including gasoline, we need to deal with facts. The American public deserves some straight talk from our political leaders if we are going to have a sensible discussion about energy policy in this country.
All the talk in Washington about how we can lower energy prices by raising taxes on the U.S. oil industry is misleading – and, as the Wall Street Journal noted last week, “junk economic theory.”
http://www.exxonmobilperspectives.com/2011/04/30/where-do-your-gasoline-dollars-go/
ExxonMobil’s earnings: The real story you won’t hear in Washington
Big numbers make headlines – like our announcement of $10.7 billion in earnings for the first quarter of 2011. What may not make the headlines is the context surrounding that number, so I thought I would share with you what I told reporters following the announcement:
When crude oil prices increase it means higher earnings for oil companies, and more importantly for most Americans – higher gasoline prices. Rising crude and gasoline prices have a very real impact on household budgets across the nation. Gasoline is an essential product, and price rises are felt by families and businesses alike.
Let me start by putting our earnings into context for U.S. motorists.
ExxonMobil’s earnings are from operations in more than 100 countries around the world. During the first quarter, more than three-quarters of our operating earnings came from outside of the United States.
The part of ExxonMobil’s business that refines and sells gasoline, diesel and other products in the United States represents less than 6 percent – or 6 cents on the dollar – of our earnings.
Why so little? Because we actually buy more crude oil to refine into gasoline and diesel in the U.S. than we produce ourselves. And these purchases are made on the open market at the prevailing rates.
During the first three months of this year, for every gallon of gasoline and other products we refined and sold in the United States, we earned about 7 cents. Compare that to the 40 to 60 cents per gallon that went from gasoline consumers to the government (state and federal) in gasoline taxes.
The underlying question people are asking is: Why are oil prices so high at the present time? The answer to this question is important because the price of crude oil accounts for most of the price of gasoline.
There are several factors involved in the rise in oil prices.
First, as a result of the global economy strengthening – particularly in countries like China, India and Brazil – demand for crude oil is on the rise.
Second, political instability in some oil-producing regions is contributing to uncertainty about future oil supplies. Oil markets are well-supplied today, but the issue is this: What will it cost to replace this supply if it is lost in the future? This uncertainty about tomorrow is reflected in prices today.
Finally, another factor behind higher oil prices is unique to the United States. And that’s the weak U.S. dollar. Oil and most other food and industrial commodities are invoiced in dollars. Accordingly, when the dollar goes “down” the price of primary commodities tend to go “up,” and vice versa.
The dollar is at a three-year low against other currencies and is approaching the record low which occurred in 2008, when oil prices were at historically high levels.
The dollar’s decline accelerated last week after a warning by Standard & Poor’s about the country’s $14.3 trillion debt and economic weakness compared to other countries.
So these factors all combine to drive oil prices up.
What is our government doing about it? Unfortunately, they’re reaching for the political playbook rather than seeking real solutions.
We understand that it’s simply too irresistible for many politicians in times of high oil prices and high earnings – they feel they have to demonize our industry.
Predictably last week the Administration established a task force to investigate oil and gas markets, now a time-honored tradition when prices increase.
And we’re seeing a return to the now-familiar misinformation about the oil industry’s taxes.
Over the last week as earnings season has approached, the Democratic Party leadership again talked about removing what they call $4 billion in oil industry subsidies. But what they really mean is that they want to increase our taxes by taking away long-standing deductions for our industry while leaving these same deductions in place for other sectors of the economy. The simple truth is that these are legitimate tax provisions to keep U.S. industry internationally competitive – to keep jobs from being exported to other countries.
Unfortunately, this false discussion about oil industry subsidies also reinforces another falsehood making the rounds: that ExxonMobil doesn’t pay its fair share of income taxes in the United States.
Let me state it unequivocally. Last year, our total taxes and duties to the U.S. government were $9.8 billion, which includes an income tax expense of $1.6 billion. Over the past five years, we incurred a total U.S. tax expense of almost $59 billion, which is $18 billion more than we earned in the United States during the same period.
And during the first quarter of this year, we incurred tax expenses in the United States of more than $3.1 billion on U.S. earnings of $2.6 billion.
So we have seen the predictable political positioning but no action to actually help bring down energy prices. In fact the government has chosen not to help increase supply by refusing to open up the vast energy resources in this country that are off limits to our industry.
We have seen exploration and development in the U.S. Gulf of Mexico – which accounts for 30 percent of all U.S. crude oil production – effectively banned for the past year by the Obama Administration.
In addition, legislation was enacted targeted at restricting the supply of oil from Canada – a country whose oil reserves are second only to Saudi Arabia’s.
Unfortunately, irresistible sound-bite politics rather than sound public policy is dominating the energy agenda in Washington – but there is one reason for optimism about America’s economic and energy security.
That optimism lies in America’s extraordinary natural gas endowment. This resource is providing the United States with an enormous economic advantage as a result of American ingenuity and innovation.
It’s nothing short of revolutionary that our industry has recently unlocked more than a 100 years’ worth of natural gas right here in the United States. And at some of the world’s lowest prices – last month natural gas was selling for 40 percent less in the U.S. than in Europe.
Think of the advantages this is already providing – in the form of power generation and fuel for manufacturing and other industries, not to mention the jobs and taxes natural gas production creates.
But there are concerns that political overreaction to a small number of isolated environmental issues could jeopardize this emerging industry and the benefits it provides.
Government policies did not cause the shale gas revolution in this country – but they could stop it in its tracks.
Policymakers need to look carefully at the facts and avoid a bias against natural gas and fossil fuel development in favor of far more costly energy sources that are already receiving massive subsidies.
In fact, we’ve already spent more on alternative energy subsidies than we did on the Manhattan and Apollo projects combined. And what do we have to show for it? Unreliable and uneconomic energy sources that still can’t compete – even at today’s prices.
On the other hand, natural gas is affordable, available – and doesn’t need taxpayer subsidies.
The technologies and industrial processes involved in developing shale gas are proven – the industry has successfully fracked more than a million wells over the last 60 years. There are thousands of feet of rock between the natural gas deposit where the fracking takes place and the water table.
Risk to water supplies and air quality can be and are being mitigated by using proper well design, operating with care and following industry best practices and procedures that are all subject to regulation and government oversight.
When these technologies are applied properly and the industry remains focused on operational integrity, we can protect our environment and public health and enjoy this unprecedented economic advantage.
Energy policy should enable safe and environmentally responsible development of all of America’s natural resources, which will support economic recovery and improved quality of life.
It’s time for our leaders to stop playing politics with the energy industry and to start working for solutions that will take the pressure off household budgets and enhance our energy security.
February 10, 2011 | Posted by Ken Cohen http://www.exxonmobilperspectives.com/2011/02/10/yet-another-attempt-to-undermine-the-nations-energy-industry/
There’s a letter making the rounds this week in Washington from a number of Democratic Senators, asking for congressional support to remove tax provisions that help enable the oil and natural gas industry to create jobs and contribute billions in tax revenues to federal, state and local governments across the nation.
While the letter wasn’t sent to ExxonMobil, I think it’s important to address the claims made in it, for two reasons: first, because they are incorrect; and second, because punishing successful companies won’t do anything to help restore our economy.
It’s just another unfortunate attempt to attack an industry that supports more than 9.2 million jobs, adds $1 trillion to the national economy – or 7.5 percent of GDP – and contributes billions in tax revenues to federal, state and local governments.
In fact, the letter’s authors went so far as to say that our industry “adds little to our economic and energy security.” These comments come as some surprise given that our industry is responsible for providing more than 60 percent of America’s daily energy needs, and invests in a wide range of technologies to increase and diversify the nation’s energy supplies.
Without any evidence, the authors refer to “tax loopholes and other subsidies that benefit big oil and gas companies.” The most often cited such provision is the Section 199 domestic manufacturers’ deduction. This tax provision applies not only to U.S. oil and natural gas companies like ExxonMobil, but to all qualified U.S. manufacturers. In other words, American automakers, software developers, newspaper publishers, alcohol and tobacco companies – all these industries benefit from the Section 199 deduction. To suggest oil and gas companies are the sole beneficiaries of this provision, and to label it a “loophole” for “Big Oil” is misleading.
The suggestion is even more disconcerting given that the U.S. oil and natural gas industry currently benefits less from this tax provision than all other qualified industries. All U.S. manufacturers can claim a 9 percent deduction – except the U.S. oil and natural gas industry, which can claim only 6 percent.
So what’s their justification? They imply that the Section 199 deduction and other tax provisions should be repealed for our industry because “oil and gas companies are doing just fine.” ExxonMobil has indeed reported strong earnings recently, to the benefit of our millions of shareholders, many of whom are middle class Americans and participants in U.S. government pension and mutual funds, such as the Thrift Savings Plan. In fact, we distributed $19 billion to shareholders in 2010 alone through dividends and share purchases.
The fact that these earnings appear large in absolute terms is a reflection of the scale of the energy industry, which supports U.S. economic activity through the reliable fuels we provide and the electric power we enable. In relative terms, however, the U.S. oil and natural gas industry’s earnings are consistent with U.S. manufacturing in general. Over the last five years, for example, earnings for the oil and natural gas industry have been in line with the broader manufacturing sector – averaging about 7 cents for every dollar of sales.
To eliminate the tax provisions to which these lawmakers refer would amount to a punitive tax increase on the U.S. oil and gas industry. Currently, our industry is one of the nation’s largest taxpayers. From 2005 to 2009, ExxonMobil’s U.S. taxes totaled $63 billion – $19 billion more than we earned in the United States during this period, and an amount that exceeds the entire proposed budget of the U.S. Department of Education for fiscal year 2011. Furthermore, our effective tax rate in 2009 was 47 percent – approximately 20 percent higher than the average of all other Standard & Poor’s Industrials, according to a recent study.
To increase our tax expenses by repealing the Section 199 deduction and tax provisions would jeopardize the U.S. oil and natural gas industry’s future investments in the United States, as well as our ability to continue being a reliable generator of goods, services, jobs and government revenues.
Given our industry’s enormous contributions to American job creation, manufacturing production, and middle class prosperity – and the importance of the domestic energy sources we produce to our economic and our energy security – I hope people look at the facts before believing these attacks on one of the key foundations of the U.S. economy.
Here is the full letter:
http://thehill.com/blogs/e2-wire/677-e2-wire/142747-top-dems-call-on-gop-to-eliminate-oil-industry-tax-breaks
February 8, 2011
Dear Speaker Boehner,
As you know, Congress must act soon on a funding measure to keep the government running past this coming March 4. We understand that as soon as this week, House leaders may begin naming specific spending reductions in order to make good on your plan to reduce funding levels by $32 billion from the current continuing resolution.
There is broad, bipartisan agreement on the need to rein in spending, make government more efficient and bring down the deficit. We believe that the question before us is not whether we should do any cutting, but what exactly should be cut. So, as you consider spending-cut ideas for the remainder of this fiscal year, we ask that you focus on cutting programs that are wasteful and inefficient, as opposed to those that help create jobs and spur economic growth.
We are concerned that some of the cuts you may propose could undermine future growth just as our economy is beginning to recover. Instead, we urge you to consider ending a number of tax loopholes and other subsidies that benefit big oil and gas companies. Closing these loopholes would save the federal government more than $20 billion over 10 years. This is just one example of a wasteful item in the budget that could be cut in order to make a down payment toward reducing the nation’s deficit. If the House chooses to adopt this suggestion, it would represent a good first step towards cutting spending in a bipartisan way.
Just last month, Exxon reported a 53% boost in profits, making it the company’s best quarter in years. At the same time, Chevron’s fourth quarter income jumped 72%. The fact is, oil and gas companies are doing just fine while many Americans are still struggling to find work and support their families.
The days of big oil companies making billions in record breaking profits while receiving billions in taxpayer-financed subsidies must end. It defies common sense to cut programs that are creating jobs, helping jumpstart our manufacturing sector and strengthening the middle class while protecting taxpayer-funded handouts to big oil companies that add little to our economic or energy security. During these tough economic times, closing more than $20 billion in loopholes for big oil and gas companies would send a clear message that we can cut spending while protecting the middle class. The country faces difficult challenges, and we look forward to working together across party lines for solutions that are in the best interests of our nation
Sincerely,
Sen. Harry Reid, Majority Leader
Sen. Dick Durbin, Assistant Majority Leader
Sen. Charles Schumer, Vice Chair of the Conference and Chair of the Democratic Policy and Communications Center
Sen. Patty Murray, Secretary of the Conference
Sen. Bill Nelson
Sen. Robert Menendez
Sen. Benjamin L. Cardin
Sen. Sherrod Brown
Sen. Sheldon Whitehouse
Sen. Kirsten Gillibrand
cc: Honorable Eric Cantor, House Majority Leader
Honorable Dave Camp, Chairman, House Ways and Means Committee
Honorable Hal Rogers, Chairman, House Appropriations Committee
Honorable Paul Ryan, Chairman, House Budget Committee
The U.S. oil and gas industry contributes more than $1 trillion a year to the American economy and supports more than 9 million American jobs, providing more than $550 billion in labor income. We also make an important contribution to federal and state treasuries. In just 2007 and 2008 alone, for example, the major industry producers incurred more than $180 billion in duties, fees, income and other taxes. Those are facts you won’t find in The Times’ editorial.
Neither will you find this one: The oil and gas industry routinely pays more taxes than it earns. ExxonMobil alone paid $22.8 billion more to federal, state and local governments in income and other taxes from 2004 to 2009 than it earned in the United States during the same period. Once again, these are facts you won’t find in The Times’ editorial.
Regarding the “special treatment” in tax policy the oil and gas industry allegedly receives, The Times gets it wrong here, too. According to the U.S. Energy Information Administration, the industry’s 2008 income tax expenses (as a share of net income before income taxes) averaged 53.2 percent, compared to the average of 32.2 percent for the S&P Industrial companies. That’s some special treatment.
But perhaps the most misleading claim is the one regarding industry tax deductions, including “the biggest of the deductions – 9 percent of qualified income from gas and oil produced in the United States.” In fact, this deduction applies to every taxpayer that produces, manufacturers, grows or extracts any property in the United States. Even the publisher of The New York Times qualifies for it. And, beginning this year, the oil and gas industry only qualifies for a 6 percent deduction. In other words, The Times enjoys a greater “tax break” in this area than the oil and gas industry. Funny how that’s not mentioned.
Bad facts can lead to bad policy – and The New York Times editorial proves the point. Its proposal to target one industry for tax punishment not only violates Americans’ basic sense of fairness, but also contradicts our own national interests. http://www.exxonmobilperspectives.com/2010/07/13/the-real-deal-on-taxes/
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