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June 13, 2008 Oil companies spend more on taxes than on oil supply developmentIf didn't know better, I would think the Democrats are really trying to lose this election. First they offered up the cap and trade global warming bill in the Senate that was quickly withdrawn when they realized what a debacle they were creating for themselves. Then this week they planned to use a windfall profits tax to vilify the oil companies and distract the public from their negligence and malfeasance for failing to enact laws and make policies to encourage the production and distribution of the life-blood of the nation- oil. Congress has repeatedly failed to produce legislation to that would lead to more meaningful energy supplies, preferring instead to pass bills that payoff favored special interests and rent seekers. This effort has been largely lead by the Democrats with RINOs aiding and abetting the cause. There is considerable debate among energy producers about how to meet growing worldwide demand. According the Energy Information agency, there is a daily supply deficit approaching one-million barrels a day. Coincidently, this approximates the amount of oil that is projected to be lifted out of ANWR in Alaska that the Democrats with assistance from a few Republicans have been blocking for almost 3 decades. In the debate over the windfall tax Democrat Senator Chuck Schumer mindlessly argued that bringing the new Alaska production online would not materially reduce the price of gas. Historically, daily world supply and demand track very closely. The graph below shows daily average production and consumption since 2003. This shows alternating supply deficits and surpluses through the third quarter of 2006 that turns to a persistent deficit thereafter. Clearly small incremental changes in supply and demand cause huge price fluxuations. In an interview several years ago, then Exxon CEO Lee Raymond, indicated that they don't even attempt price forecasts when they make multi-decade future investment plans.  Over the last several the major oil companies have been driven away from investing money in future exploration and production. The so-called Supermajors, Exxon, BP, Shell, Chevron. Conoco, and Total have paid more in taxes than they have invested in the oil business. For the three year period, 2005 to 2007 these companies have paid $292 billion in taxes and invested $265 billion in capital projects. Stunningly, Exxon has spent nearly twice as much buying back it's own stock ($78 billion) as it has on capital projects ($44 billion).  Exxon Mobil has been a favorite whipping boy in Washington, even Standard Oil scion Democrat Senator Jay Rockefeller couldn't resist getting in on the fun. While. dilletantes like Rockefeller and many of his Senate brethren, can afford to play around like with this, the country cannot afford this luxury. Exxon Mobil's three year record of capital spending, stock buybacks and tax payments are indicative of serious secular and structural changes in the provision of energy. Exxon Mobil is buying back stock because they can't find enough energy investments to deploy their excess cashflow. Domestic drilling is severely constrained and international opportunities are scarce. If the business was so great they would use more money to invest in exploration.  The voters are rapidly awakening to this policy and legislative failure. Beware, Democrats. |
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Comments
Perhaps the Dems can use the money they get after they sue OPEC to subsidize "Big Oil"
Posted by: American Thinker fan | June 13, 2008 11:37 AM
The America hating Dems will probably get a larger margin in Congress via the ignorant public. People just don't want to think or work at it anymore. Sad,but true,I think.
Posted by: Fred Edwards | June 13, 2008 01:31 PM
The America hating Dems will probably get a larger margin in Congress via the ignorant public. People just don't want to think or work at it anymore. Sad,but true,I think.
Posted by: Fred Edwards | June 13, 2008 01:32 PM
McCain attacked the obscene profits of oil companies today, he is no better than Obama. We are screwed. The question is not one of liberalism but which useless liberal gets elected. Beware everyone.
Posted by: DaveT | June 13, 2008 02:02 PM
I think all of these issues speaks to a larger problem. When did the profit motive become a bad thing?
Posted by: Ben | June 13, 2008 04:15 PM
Congress should work for us,not us for them.
Posted by: Will Becker | June 13, 2008 04:22 PM
The most amazing thing about this do nothing congress is their inability to realize that these oil companies (almost all of them publicly traded) dividend out their earnings to Mr and Mrs. John Doe and the substantial part of all earnings are distributed to regular taxpayers in the form of dividends and retirement funds. The reality is the politicians don't know their ear holes from a hole in the ground.
Posted by: JEFF | June 13, 2008 06:50 PM
Congress can't solve the problem of oil prices because they don't feel the pain. Just yesterday, I posted that the average net worth in the Senate in 2006 was $8.9M and that 44% of the House have a net worth of greater than $1M. We pay for their cars, we pay for their travel, and what we don't pay for, lobbyists are happy to kick in their share so that Members of Congress don't feel the pain in the least.
Our problem is not only that they don't do as we want, it's that we keep electing them. Until enough of us who are concerned about the declining quality of life gather at the ballot box and do our best to replace the do-nothings with problem-solvers, it's only going downhill.
Posted by: Geoff Gale | June 13, 2008 09:25 PM
Most offshore oil production and exploration has been banned since a federal law passed in 1981.
The Montreal protocol was opened for signature on September 16, 1987 and entered into force on January 1, 1989.
The Clean Air Act Amendments of 1990 proposed emissions trading, added provisions for addressing acid rain, ozone depletion and toxic air pollution, and established a national permits program.
In each of these cases, a REPUBLICAN president, sold out his parties principles, the consumer, and the people of the world, for the illusory goal of getting a liberal attack dog media into sayin, "Gee ain't he a nice guy."
When Clinton was President, and it came time to support the global warming in Congress, the Democrats joined the Republicans to say "No way in hell".
Posted by: James Mayeau | June 13, 2008 09:35 PM
It never ceases to amaze me that our do nothing congress opposes the development of domestic oil. We are hostage to environmentalist pie in the sky notions about windmills, solar panels and the like, all of which are far from being cost effective much less able to provide for our energy needs. When are we going to wake up and use our votes to send these people back to the unlighted, unheated prehistoric caves they presumably imagine are preferable to our prosperous way of life. Remember: the opposite of PROgress is CONgress.
Posted by: mark | June 13, 2008 10:57 PM
It never ceases to amaze me that our do nothing congress opposes the development of domestic oil. We are hostage to environmentalist pie in the sky notions about windmills, solar panels and the like, all of which are far from being cost effective much less able to provide for our energy needs. When are we going to wake up and use our votes to send these people back to the unlighted, unheated prehistoric caves they presumably imagine are preferable to our prosperous way of life. Remember: the opposite of PROgress is CONgress.
Posted by: mark | June 13, 2008 10:58 PM
"If didn't know better, I would think the Democrats are really trying to lose this election. "
if only the rebublicans would act like they actually want to WIN it. I'm looking at YOU McCain.
Posted by: fretless | June 14, 2008 12:26 AM
How do I get "excess cashflow"?
Oil company profits are way up. Why should anyone pity them? They're in a global business. That there aren't enough domestic sources means diddly-squat for them. The sources are global and so are the companies. This doesn't mean Americans should tax them over and above what others pay. It just means we shouldn't shed any tears for them. They're doing just fine.
Posted by: pmk | June 14, 2008 09:13 AM
Great report. Too bad the Drive-by-Media quit giving real facts long ago. At least AT is here to supplant them.
One request. Would you please add the supposedly obscene profits from the same time period as a comparison? I found 39.5 B$ in 2006 and 40.6 B$ in 2007. I don't have data for 2005 and 2006, But it is looking as if the taxes are only slightly smaller than the profits. 10% profit is not that good. It is high time someone pointed out the windfall taxes the government has been taking at our expense.
Posted by: James Bailey | June 14, 2008 10:29 AM
I think we should restrict the funding of all the Democrats (and RINOs) projects to the windfall from the OPEC suite
Posted by: gus | June 14, 2008 02:45 PM