While no one in the energy industry discourages alternative energy sources, despite what the current occupants of the White House would have you believe, the dirty little secret is that big energy leaders are supporting and financing alternative energy research and policy. It plays well to his liberal base, but President Obama's continued demonizing of "big oil" and the energy producers is a smoke screen. It is pure politics and just more of Obama's love of straw men arguments when he fails to make his case to the voters on the strength of his own philosophy.
"Big oil" is not the boogie man. It is the source of the fuel that powers our nation and makes our lives quite comfortable. Absolutely nothing in your life is not touched by oil and gas production. We are a petroleum based world.
With the price of gas rising to uncharted territory, President Obama is fighting back the only way he knows - he is demanding that the oil and gas industry be made the bad guys. He wants the oil and gas tax breaks cut off. He calls them subsidies to encourage a negative reaction from his audiences on the campaign trail but they are the same tax breaks every company gets, in all industries, across the board. Facts are stubborn things.
Obama likes to declare that oil and gas companies are simply making too much money. He likes to play the game of choosing winners and losers in government favors and he enjoys being the decider when it comes to how much a company should make in profits. Here's some facts:
President Obama says he wants to end subsidies for what he calls "the fuel of the past," but lucky for him oil and gas will be the fuels of the future too. His budget-deficit blowout would be so much worse without Big Oil, because the truth is that this industry is subsidizing the government.
Much, much worse, actually. The federal Energy Information Administration reports that the industry paid some $35.7 billion in corporate income taxes in 2009, the latest year for which data are available. That alone is about 10% of non-defense discretionary spending—and it would cover a lot of Solyndras. That figure also doesn't count excise taxes, state taxes and rents, royalties, fees and bonus payments. All told, the government rakes in $86 million from oil and gas every day—far more than from any other business.
Not paying their "fair share"? Here's a staggering fact: The Tax Foundation estimates that, between 1981 and 2008, oil and gas companies sent more dollars to Washington and the state capitols than they earned in profits for shareholders.
Exxon Mobil, the world's largest oil and gas company, says that in the five years prior to 2010 it paid about $59 billion in total U.S. taxes, while it earned . . . $40.5 billion domestically. Another way of putting it is that for every dollar of net U.S. profits between 2006 and 2010, the company incurred $1.45 in taxes. Exxon's 2010 tax bill was three times larger than its domestic profits. The company can stay in business because it operates globally and earned a total net income after tax of $30.5 billion in 2010 on revenues of $370.1 billion.
The oil and gas industry is the most taxed of any in this country. And, there's this:
Specific oil and gas investments are also taxed at higher rates than other energy plays, which were surveyed in a 2009 paper by economist Gilbert Metcalf, now a deputy assistant Treasury secretary. He found that oil drilling (for an integrated company) clocks in at a 15.2% tax rate, refining at 19.1% and building a natural gas pipeline at 27%.
For comparison, nuclear power comes in at minus-99.5%, wind at minus-163.8% and solar thermal at minus-244.7%—and that's before the 2009 Obama-Pelosi stimulus. In other words, the taxpayer loses more the more each of these power sources produces.
As for the "subsidies" that Mr. Obama says the oil industry receives, these aren't direct cash handouts like those that go to the green lobby. They're deductions from taxes that cover the cost of doing business and earning income to tax in the first place. Most of them are available to other manufacturers.
What Mr. Obama really means is that he wants to put the risky and capital-intensive process of finding, extracting and producing oil and gas at a competitive disadvantage against other businesses. He does so because he ultimately wants to make them more expensive than his favorites in the wind, solar and ethanol industries.
When the facts are spelled out, Americans can read for themselves. The phony profit war that is waged by Team Obama is detrimental to the entire country. Oil and gas exploration and then production is hideously expensive. To act as though every penny made goes directly into an oil and gas executive's pocket - or even to the shareholders - is ridiculous. The president should be laughed off the stage.