Bio Oil Gets Grilled On Capitol Hill
By Justin Gardner | Related entries in Economy, Energy, Gas, Money, Oil, Taxes, VideoHow do they explain their record profits? Good planning? Price gouging? Lucky breaks?
First CBS has this report…
I like that…the reason their profits are so big is because their companies are so big? I guess we all should just start building bigger companies then, yeah?
Then from the AP, and note how one of them talks about the effect of the weakening dollar…
Here’s the thing…there’s no good reason why we’re giving these companies tax breaks. Not anymore. It’s time to take that money and start investing in our nation’s green energy future. Because between our inability to persuade OPEC and these execs’ “hey, this is just the market” answers…this rising price trend shows absolute ZERO signs of slowing down. And what I mean by that are there are literally no answers to how we turn this around…except to replace gas with alternative fuel sources.
Meanwhile, crude hit $134 a barrel today and some are warning of $12-$15 a gallon gas in the coming years due to “peak oil.”
*shudder*
Folks, it’s obvious that we’re hitting an inflection point and the time to go green was yesterday. Otherwise we’re looking at forced rationing in the not too distant future. This is now a very real, very dangerous economic stability/national security issue and if the oil companies aren’t going to invest in earnest in alternative fuel sources, it’s up to the government.
Again, bye bye tax breaks. Anything less is negligent.
This entry was posted on Wednesday, May 21st, 2008 and is filed under Economy, Energy, Gas, Money, Oil, Taxes, Video. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
May 21st, 2008 at 7:33 pm
While I agree on a global scale there are a lot of factors of why oil and gas is so expensive, and I get the argument that it takes money to make money (ie: finding new oil, drilling, setting up the infrastructure, etc)… I whole-heartedly think the main reason we are seeing record-high profits is because the oil industry understands that a) oil production has either peaked and if it isn’t on the decline, it will be very shortly, and b) the oil industry probably feels if Obama gets into office, their “salad days” so to speak are over forever. The Bush regime has pandered to the oil companies long enough with tax breaks, and now there is a lot of anger aimed towards them. Either way, they should be taxed like everyone else effective immediately, with all proceeds going towards finding real ways to bring cheap, renewable energy to our doorsteps.
May 21st, 2008 at 8:39 pm
100 million for renewable energy huh? While the company made around 40 billion?
Yeah, tax the shit out of’em, then the second they try and raise prices, nail’em to the wall for price gouging and levy a 40 billion dollar fine.
Bastards.
May 21st, 2008 at 8:41 pm
QandO has an interesting post on some myths and realities of the Oil industry. Did you know that private companies (IOC’s) like Exxon-Mobil own only about 6% of the total reserves in the world? Most of the oil is owned by national oil trusts and other government entities around the world, and therefore are much more responsible for price-setting.
Also, U.S. Oil companies have relatively mediocre profit margins compared to computer, clothes and food companies. Most of the stock from oil companies is owned by investors’ personal retirement accounts, pension funds and mutual funds, not corporate executives. Though your IRA or pension doesn’t get taxed until you take out the money, when the government taxes oil companies close to 40% of what they earn, that means less money for you if you have an IRA or a mutual fund or something - not to mention those costs passed on to the consumer at the pump.
Though Exxon made about 11 billion in profit last year (again, most returns going to retirement accounts and mutual funds), it payed 28 billion in corporate taxes last year, which is more than the bottom 50% of American taxpayers combined - just one company!
May 22nd, 2008 at 2:11 am
so….they basically threaten to raise gas prices if their tax breaks dwindle….thugs. If demand wasn’t so high the prices wouldn’t be either unless it’s a cartel conspiracy a la DeBeers. I doubt this is the case….I think the age of resource scarcity is upon us folks…best get used to it.
May 22nd, 2008 at 6:05 am
These stories always paint the Oil companies as getting special tax breaks, when they don’t in fact. They get the same tax breaks that all US manufacturers get. It isn’t right to write the tax code for businesses but making an exception for Oil.
And if you do take their windfall profits, they will cap their wells domestically and move more internationally to avoid the tax. That will dwindle supply, raise oil costs for us, and hurt the tax coffers because they won’t be paying any tax.
Now if you want to take about subsidies. Go after big agriculture. Then you’d have an argument.
May 22nd, 2008 at 7:30 am
Much to their chagrin, Americans are simply reaping the fruit of their profligacy.
May 22nd, 2008 at 7:54 am
Jimmy,
Once again, you’re cherry picking you’re info to make an argument, leaving things out completely, or just plain don’t know the facts.
In 2007, ExxonMobile made $390,328 billion dollars before expenses. Now, it is fair to say that $400 billion is not profit. The cost of crude oil to ExonMobil in 2007 alone was $199.4 billion. Other costs and expenses brinngs Exxon Mobile’s expenses to $334 billion
Any reasonable person would say that is a good chunk of change, and we cannot punish oil for having huge operating expenses.
Saying they only made 11 billion in profit and then paid 28 billion is grossly misleading–in fact it is inaccurate
Exxon’s profits were $70.4 billion before taxes, then their tax bill ON THAT PROFIT was $29.8 billion. Big oil needs to play by the same rules as everyone else. The government taxes profits (you can argue against the high corporate tax rate if you like–that is fair)
That leaves a profit of $40.6 billion.
Where did you get $11 billion? They made about $11 billion in the last quarter alone.
Finally, while I cannot find the numbers for 2007, the government gave (read, WE THE FREAKING PEOPLE) gave about $8 billion in incentives and subsidies to Big Oil in 2006–I am not sure what Exxon’s cut was.
Now, if you don’t want to blame the big oil companies for the gas prices, you can make that argument since we know the real culprit is speculation. It’s fair to say that the Oil companies are buying oil on the open market and their expenses are high, even though most people would argue that $40 billion in profits is obscene. (I would also argue that “holy GOP free market is broken)
But you can make that argument.
But for you to come here crying for poor big oil–it just shows that you have completely lost touch with reality.
May 22nd, 2008 at 8:41 am
The problem, Mr. Gardner, is that people like you fall for this B.S. demagoguery and make it impossible for this country to come up with a real energy plan. Do you think you can just flip a switch and change over to alternative energy? Have you even thought about the time required to replace America’s fleet.
We need a plan that includes more drilling in America in the short term that will allow us to transition to an alternative energy future. It is time to get off your ideological high horse and approach this problem as Senator Obama says, “with no preconditions.”
We need to look into every option, and just blaming oil companies accomplishes nothing. In fact, it is worse than doing nothing because it distracts from a real discussion of the problem. That problem is rising world oil demand and limited supply.
Let me ask you, what was the price of oil the last time Congress brought in oil company executives for their dog and pony show? What is it now?
So you be happy with your windfall profits taxes and the utterly ludicrous suing of OPEC for anti-trust violations. Meanwhile oil will rise above $200 a barrel and there will still be no energy plan.
But the politicians will know that your vote can be bought with subterfuge and demagoguery.
May 22nd, 2008 at 9:09 am
You are right it was 11 billion this quarter, 40 billion this year, my bad. That is still over 40% of its profits taxed, which is nearly twice the percentage of the domestic maufacturing sector. It is quite clear that big oil is taxed and regulated way more than any other industry in the United States. The only reason why there is an issue here is everyone uses petroleum, we have always been spoiled with low prices, and we expect our wants and needs to be provided to us easily going forward. It is emotional and not rational. It just doesn’t seem fair, so we need the government to force them to do what we want them to do. Imagine if U.S. oil production and distribution were nationalized by a single government entity. It would be a disaster if you expect low prices.
May 22nd, 2008 at 9:59 am
You can call my opinions whatever you please, but I’m certainly not proposing oil via a single government entity. I’m talking about getting rid of tax breaks for private companies making RECORD profits. Because if they’re making record profits, they don’t need tax breaks. How is this very simple math lost on everybody?
The government would then offer that money up to the private sector to develop green technologies…of which the oil companies are a part of and can bid for. So they can get the money back, but only as a part of the competitive free market…not corporate welfare.
Everybody following me still? Anybody think I’m proposing something that’s ignorant of the facts or is designed to incite some sort of misguided populist passions?
The point here is that they’re not doing enough to develop green technologies on their own, and at the same time they’re making these crazy profits. Something has to give, and what we can ask for as taxpayers is that they pay their fair share just like the rest of us. That’s not demagoguery folks, that’s just common sense.
May 22nd, 2008 at 11:04 am
No, what Congress and yourself do is feed people like this
There can be no honest discussion of the problem as long as you propagate the belief that taxing the big bad oil companies will fix all our problems. By disseminating the lies and demagoguery of Congress, you have become part of the problem. You stand with Congress against finding a feasible solution to our energy problems.
The point is: you want to tax oil companies more, fine go ahead.
But you will have solved nothing and prevented discussion of a real solution.
May 22nd, 2008 at 11:59 am
There is a bit of froth in the price from speculation involved, yes. There is a bit from a weakened dollar as well.
The oil companies are pumping as fast as they can. The fundamentals are: world supply is stuck at 85 million barrels per day, has been for three years. World demand has grown over that time, obviously…and it’s grown to the point where it is outstripping supply.
So, there is a supply and demand story here…there is little supply coming online anytime soon–but demand will keep growing from abroad.
Demand will be destroyed at some point, but I have no idea if we’re even close to that number yet. $4.50 a gallon? $5?
I hope you’ll check out The Oil Drum to learn more about peak oil. http://theoildrum.com
May 22nd, 2008 at 1:28 pm
bit of froth?
Estimates about the impact of speculation range as high as $60 per barrel…that is more than a bit of froth. And the weakened dollar is a double edged sword…not only does the declining dollar mean that $1 doesn’t buy the same amount of oil as it did a year ago, it also means that investors who once put their money in other areas now put their money into oil commodities because those other areas (measured in dollars) are no longer attractive.
I am annoyed with big oil and their $40 billion in profits, but I don’t blame it nearly as much as I decry the pure idiocy of the Bush administrations policies that have led us here.
It is all related.
The most obvious result of Bush’s weak dollar policies is it translates into a cut in the real spending power of American consumers–in effect, a reduction in real income.
But that’s only part of the problem. The weaker dollar also weakens the role of the U.S. dollar as the world’s reserve currency so investors and central banks around the world invest in other areas rather than US assets (which because of the weaker dollar are declining).
Also, we’ve heard the Bush administration extolling a weaker dollar because it will lead to a reduction in America’s trade deficit. Nonsense–this flies in the face of Bush’s policies that have lead to outsourcing at outrageous levels. More importantly, since 40% of the current trade imbalances is due to oil imports–imports that are denominated in U.S. dollars, the low dollar has no impact. Add in the fact that at least 20% is due to trade with China, which controls the value of its currency and this prevents the trade imbalance from improving.
What a weaker dollar really does is to encourage American and international investors to invest in non-American markets and commodies like oil–with all this money chasing oil (since traditional US investments are devalued), the demand for oil spikes to outrageous levels.
So why is Bush pushing a weaker dollar?
Because Bush and the people who support him are getting what they can now before he gets booted from office and the glorios GOP trainwreck comes to a screeching halt for the next two decades. Investors like a weaker dollar since the profits of American multinationals get a boost from foreign earnings being translated into U.S. dollars.
Short term, greedy thinking from the people who don’t give a damn about the average person. That’s what 8 years of Bush has meant.
I swear, I know a lot of people who call themselves “conservative” and voted for this guy twice and they are hurting, but still think they’re better off because a “tax and spend” liberal is not in office. Arggh!
May 22nd, 2008 at 2:28 pm
gerryf could have not explained it better, He should of wrote the article. I find it hilarious that we should go after oil co because there publicly traded commodity product is to high. It is obvious the author of this article need to do do some research. If there is one organization to blame it is the federal reserve for artificially low interest rates, if we paid for oil in gold there would be no increase in price. We pay for oil in dollars and when dollars lose value it cost more dollars to buy the same product.
May 22nd, 2008 at 3:33 pm
They are also paying RECORD taxes. If you tax them more, but you don’t want Americans to pay more at the pump, then the only solution is for the government to cap prices which will result in rationing and shortages. This will not help to end our current recession, rather, it will prolong it further, as it has in the past.
Gerry is right; there is a significant amount of speculation driving up the price of oil. The world is undergoing an economic slowdown, but the value of oil keeps going up and up because the demand is still there. Thus, people are not investing in things that don’t earn returns anymore and are searching for somewhere to put their money. This might actually be a good sign, because when the housing market bottoms out, and the “credit crunch” begins to dissipate, the economy will begin to grow again and the oil bubble may burst, resulting in lower prices quickly.