Big Oil headed for tougher Congress

[hb06]

"But next year, Big Oil is likely to feel as if it's wearing one of those "kick me" signs."

"The Democratic leadership has already indicated it will try to repeal earlier tax breaks for oil companies. A gusher of new legislation could develop as well, as Democrats get a chance to see their energy bills move past the trash can. In fact, the Democrats will try to put together their own version of a comprehensive energy bill that tackles everything from gas-mileage standards to tax breaks for alternative energy sources, some congressional analysts believe."

http://www.csmonitor.com/2006/1115/p01s02-uspo.html

[Godiva]

Exactly why does the Oil industry need tax breaks?

Most companies use their profits to pay their expenses, both operating and R&D if there is R&D involved.

Why should the Oil companies be exempt from this normal market economy fact and have their R&D subsidized by the Federal Government? Especially when the Government doesn't get anything in return?

Oh, and I'm in California. Let the Oil Companies pay us the same as they pay other states. We could sure use the money.

I don't get how giving tax breaks and subsidies to Oil companies helps the working class. The price of gas is still high. What's the point if they keep the supply short enough to ensure high prices at the pump?

[TimBikes]

<div class='quotetop'>QUOTE(Godiva @ Nov 22 2006, 01:02 PM) [snapback]353200[/snapback]</div>

Exactly why does the Oil industry need tax breaks?

Most companies use their profits to pay their expenses, both operating and R&D if there is R&D involved.

Why should the Oil companies be exempt from this normal market economy fact and have their R&D subsidized by the Federal Government? Especially when the Government doesn't get anything in return?

Oh, and I'm in California. Let the Oil Companies pay us the same as they pay other states. We could sure use the money.

I don't get how giving tax breaks and subsidies to Oil companies helps the working class. The price of gas is still high. What's the point if they keep the supply short enough to ensure high prices at the pump?
[/b]

I agree - though a lot of industries get breaks to encourage production - which was the basic premise here according to the article. Ideally, there would be no "breaks" for any industries, that way the market could determine the outcomes.

On the other hand, the problem here is when oil is priced low on the market there is no $ to be made in drilling in the less accessible areas (such as deep sea). So when there is no investment, future oil supply disruptions are exacerbated and the price skyrockets. Even if you advocate a move away from oil (which I do), large economic disruptions of this sort are not something you want. It's a tricky situation.

[Alric]

Here is the link where you can watch, listen or read to the original PBS report.

http://www.pbs.org/now/shows/224/index.html

"But are oil and gas companies ripping us off? Are they paying all of the royalties they should be paying? Some in Congress say these companies are getting sweetheart deals, deals that could cost the public 80 billions dollars. That's right, 80 billion dollars owed to the American taxpayer, and so far, the check is not in the mail..."

And

"It's no paltry sum. Royalties from oil and gas exploration are the government's second largest source of revenue, behind income tax."

[MegansPrius]

<div class='quotetop'>QUOTE(TimBikes @ Dec 6 2006, 03:22 AM) [snapback]358344[/snapback]</div>

I agree - though a lot of industries get breaks to encourage production - which was the basic premise here according to the article. Ideally, there would be no "breaks" for any industries, that way the market could determine the outcomes.

On the other hand, the problem here is when oil is priced low on the market there is no $ to be made in drilling in the less accessible areas (such as deep sea). So when there is no investment, future oil supply disruptions are exacerbated and the price skyrockets. Even if you advocate a move away from oil (which I do), large economic disruptions of this sort are not something you want. It's a tricky situation.
[/b]

In the third quarter of 2005 alone, the five biggest companies earned a staggering combined total of more than $30 billion:
Company 3rd Quarter Profits
ExxonMobil $9.92 billion
Royal Dutch Shell $9.03 billion
BP $6.5 billion
ConocoPhillips $3.8 billion
Chevron Texaco $3.6 billion

That's 30 billion in Profit in One Quarter.

Since George Bush became President in 2001, the top five oil companies in the United States have recorded profits of $342.4 billion through the first quarter of 2006:

ExxonMobil: $118.2 billion
Shell: $82.3 billion
BP: $67.8 billion
ChevronTexaco: $43.1 billion
ConocoPhillips: $31.1 billion

That's profits folks. That's a lot of money they have lying around to spend on lobbying. But they sure did get a good return ($342 billion) on their investment ($58 mil in campaign donations since 2001) in the current administration. Since President George W. Bush’s inauguration in January, 2001, oil prices have increased 240 percent.

In 2005 Bush signed an energy law that spent $5 billion in new tax breaks and government spending programs that benefited oil companies, and exempted a wide range of oil and natural gas drilling from the Safe Drinking Water Act and the Federal Water Pollution Control Act. The bill did nothing to increase energy efficiency, such as through improving fuel economy standards.

It certainly is a tricky situation.

[TimBikes]

<div class='quotetop'>QUOTE(MegansPrius @ Dec 6 2006, 09:40 AM) [snapback]358480[/snapback]</div>

In the third quarter of 2005 alone, the five biggest companies earned a staggering combined total of more than $30 billion:
Company 3rd Quarter Profits
ExxonMobil $9.92 billion
...
[/b]

So Exxon earned $10B in profits. That is meaningless to the discussion unless you look at their revenues (2005 = $340 billion) and their taxes paid.

For the first 3 months of 2006 Exxon paid $25.7 billion in taxes. That's nearly as much as the $30B in profits you think are so outrageous (from the top 6 companies combined).

I'm not defending the tax breaks unequivocally - but they were put in place (according to the article) to induce investment in productive capacity at a time when oil prices were low. Removing them may have some pros and some cons so they should be evaluated in the context of what is in our national interest / objectives, then restructured or removed accordingly. Not just dropped because big oil is "evil".

[MegansPrius]

<div class='quotetop'>QUOTE(TimBikes @ Dec 6 2006, 02:21 PM) [snapback]358509[/snapback]</div>

So Exxon earned $10B in profits. That is meaningless to the discussion unless you look at their revenues (2005 = $340 billion) and their taxes paid.

For the first 3 months of 2006 Exxon paid $25.7 billion in taxes. That's nearly as much as the $30B in profits you think are so outrageous (from the top 6 companies combined).

I'm not defending the tax breaks unequivocally - but they were put in place (according to the article) to induce investment in productive capacity at a time when oil prices were low. Removing them may have some pros and some cons so they should be evaluated in the context of what is in our national interest / objectives, then restructured or removed accordingly. Not just dropped because big oil is "evil".
[/b]

Tim,
You're distorting or simply misunderstand the word profit. The earlier figures I quoted in my prior post are post tax. From Exxon's 2005 annual report (available on their website)
Income before taxes
59,432,000,000
Taxes
23,302,000,000
Net Income (profit)
36,130,000,000

[dbermanmd]

<div class='quotetop'>QUOTE(TimBikes @ Dec 6 2006, 01:21 PM) [snapback]358509[/snapback]</div>

So Exxon earned $10B in profits. That is meaningless to the discussion unless you look at their revenues (2005 = $340 billion) and their taxes paid.

For the first 3 months of 2006 Exxon paid $25.7 billion in taxes. That's nearly as much as the $30B in profits you think are so outrageous (from the top 6 companies combined).

I'm not defending the tax breaks unequivocally - but they were put in place (according to the article) to induce investment in productive capacity at a time when oil prices were low. Removing them may have some pros and some cons so they should be evaluated in the context of what is in our national interest / objectives, then restructured or removed accordingly. Not just dropped because big oil is "evil".
[/b]

A voice of reason in a cacophony of drivel.

I thought we were getting oil from Iraq - I mean - isn't that why we invaded Iraq - for their oil How much are they making from Iraqi oil

I can't wait till the Dems B**ch slap the oil companies - prevent them from expanding refining capacity - prevent them from drilling for new sources (while we let other countries drill in the Gulf of Mexico), slap extra taxes on them.... such short sighted stupidity. it will get worse though - cant wait to see what they do with Iran and Islamofascism/terrorism.

[SSimon]

<div class='quotetop'>QUOTE(MegansPrius @ Dec 6 2006, 02:53 PM) [snapback]358530[/snapback]</div>

Tim,
You're distorting or simply misunderstand the word profit. The earlier figures I quoted in my prior post are post tax. From Exxon's 2005 annual report (available on their website)
From the Exxon 2005 annual report
Income before taxes
59,432,000,000
Taxes
23,302,000,000
Net Income (profit)
36,130,000,000
[/b]

Looks like they're paying an approximate 39% tax margin which seems in line with me. I see nothing egregious here. You mention $5 Billion in tax breaks for the oil companies. Wikipedia sites the following tax breaks per industry, in accordance with the 2005 energy law:

* $4.3 Billion for nuclear power[3]
* $2.8 billion for fossil fuel production
* $2.7 billion to extend the renewable electricity production credit
* $1.6 billion in tax incentives for investments in clean coal facilities
* $1.3 billion for conservation and energy efficiency
* $1.3 billion for alternative motor vehicles and fuels (ethanol, methane, liquified natural gas, propane)

I am not an advocate of Bush concerning the environment. I recognize that he's one of (if not the) worst stewards of land that we've ever had in office. I'm also not an advocate of the oil industry. But, as long as the oil companies aren't receiving favorable treatment and incentives over the R&D for alternative energies, I see no problems with the profits recognized by the oil campanies. While I recognize that 61% net margins are not easily recongized, if companies are able to keep their overhead in check to carry this percentage of margin to their bottom line, what's the problem? Maybe I'm colored by my opinion that all of our natural resources should be priced excessively high so that we, as individuals, garner more respect for same. Water is basically a free commodity and this is evidenced by the numerous sprinklers left on that water people's driveways more than their lawns.

[Alric]

Part of the problem is up to $80 billion that oil companies are not paying the government for drilling royalties:

http://www.youtube.com/watch?v=GKCoUh44l2c