The People of America's Oil and Natural Gas Indusry

Energy Today - May 16, 2011

Rayola Dougher

Rayola Dougher
Posted May 16, 2011

ExxonMobil Perspectives: New York Times Advocates for Short-Term Political Gain on Tax Issue, Misses Long-Term Economic Gain for Americans: With its Sunday editorial, The New York Times continues the campaign to eliminate - only for the U.S. oil industry - standard deductions that are available to all industries and manufacturers. This is arbitrary, discriminatory and misinformed. According to the Times' logic, the price of oil - a globally traded commodity - is up, so people have to pay more for gas, so the government should end tax measures that help protect the jobs of Americans who work in the oil and natural gas industry. The logic is especially hard to swallow when the Times neglects to mention that it enjoys a higher deduction than we do for one of the measures it's campaigning to have taken away from our industry. The measure is the Section 199 domestic manufacturers' provision. The New York Times - along with auto makers, software developers, movie producers and a whole host of other industries - qualifies for a 9 percent deduction under this provision. The oil and natural gas industry is already limited to a 6 percent deduction. Detroit News: Consumer Would Pay for Big Oil Taxes: Be wary of the effort by Democrats to strip away tax credits from oil companies. Oil company executives were hauled before Congress on Thursday, with the implied threat of losing roughly $30 billion in tax breaks enjoyed by the industry. While killing the tax breaks makes for good politics, it's reckless policy. Driving up operating costs for the oil companies ultimately will result in higher prices for gasoline and nearly every other consumer good, including heating fuel...The oil industry also gets about $4.4 billion to encourage domestic exploration. With the Obama administration already squeezing development of at-home oil resources, further discouraging domestic production would seem a poor idea, and again one that would likely drive up prices.

Boston Herald: Drill, Baby, Drill: Yesterday the president finally put aside at least part of his post-oil spill inertia to order the Interior Department to conduct annual lease sales in Alaska's National Petroleum Reserve. Barack Obama made the announcement in his weekly radio address, and frankly it comes not a moment too soon. While the president focused on rising gasoline prices and the need to increase domestic energy production generally, there is another huge reason for increasing production in the north, and that is the shrinkage of flow through the Alaska Pipeline. If that flow dries up, West Coast and Hawaiian refineries would have to rely on imports, meaning gasoline prices would rise in vote-rich California and other Western states...Of course, he also used the opportunity to pitch for increasing the tax burden on oil and gas companies by $4 billion -- thus removing one huge incentive to pursue drilling in difficult-to-access spots. And if Congress is foolish enough to go along, likely further increasing the price of oil. The president can't grasp the concept that taxes are passed along to consumers.

The Enterprise Blog: Now that It's Open Season on Big Oil, Here Are Some Facts: Here are some facts about earnings for the oil industry and ExxonMobil to provide some balance to this year's "open season" on oil companies. 1. In the most recent quarter, the "Major Integrated Oil and Gas" industry earned an average profit of only 6.2 cents on every dollar of revenue. In comparison to the several hundred other industries in the United States, the profit margin of the oil industry ranks No. 114 out of 215 industries, placing Big Oil right in the middle of profitability for private industries. If Obama and Congress want to target "excessive" corporate profits, there are hundreds of other industries that are much more profitable than the oil and gas industry. For example, the surge in commodity prices has resulted in "windfall profit" margins of 31 percent for the silver industry, 23 percent for the copper industry, and 19.8 percent for the gold industry.

Additional Resources:

NewsMax: Chevron CEO: Big Labor Support for Oil Makes Sense for Jobs

National Review: End Big Oil Subsidies?

Commonwealth Foundation's: Policy Blog: Who Owns "Big Oil"?

ABOUT THE AUTHOR

Rayola Dougher is senior economist at The American Petroleum Institute (API), where she analyzes information, manages projects and develops briefing materials on energy markets and oil industry policy issues. She is the author or co-author of economic research studies covering a diverse range of topics including crude oil and petroleum product markets, gasoline taxes, energy conservation and competition in retail markets. In addition to testifying before federal and state legislators, she has participated in numerous newspaper, radio and television interviews on a wide range of issues affecting the oil industry, including crude oil and gasoline prices, industry taxes and earnings, exploration and production, and refining and marketing topics.

Prior to joining API, Rayola worked at the Institute for Energy Analysis where her research focused on carbon dioxide related issues and international energy demand and supply forecasts. Rayola holds a Masters degree in Economic Development and East Asian studies from the American University and a degree in History and Political Science from the State University of New York at Brockport.