This Wednesday, Barak Obama will take his magical energy tour on an extended road trip to the states of Oklahoma, Colorado, New Mexico and Nevada, ostensibly to tout and defend his energy policies. I’m not sure why he’s going to Oklahoma as it was the reddest of red states in the 2008 election. There will be plenty of angry oil patch hands to meet him when he visits Cushing, OK on Thursday. At any rate, here’s what we can expect;
“Fossil fuels are yesterday’s energy; the energy of the future is wind, solar and biofuels.” Well, I’ll tell you what, BO; I have yet to fill up my gas tank with wind, sunbeams or algae (or as Dr. K-Hammer says “stuffing seaweed in your gas tank”). Your coal-fired Volt is a fire hazard and the $108,000 Fisker won’t even work for 20 minutes.
“We need to end the ‘subsidies’ to the big greedy oil companies”. Like everything else the Pharaoh in Chief™ says, this is simply bogus. The oil companies receive the same sort of tax breaks that the manufacturing segment of the economy receives. Those tax breaks generally amount to $4 billion per year. An article last year in The American Thinker provides a pretty good synopsis of what the so-called subsidies are:
They are all tax “breaks,” or earnings that oil companies get to keep, not money paid out from the US Treasury.
The amount of earnings not collected in taxes is about $4.3 billion per year — about 0.2% of this year’s deficit and enough to fund about 10 hours of current US government spending.
A full $3.55 billion of that amount (82%) is due to the way taxes are treated for all industries or manufacturers. To change these tax laws only for oil companies would require singling them out among all industries for special mistreatment. (I’m not a lawyer, but that sounds like a bill of attainder to me, something our Constitution forbids.)
The only tax in which the oil industry seems to get special treatment compared to other industries is intangible drilling costs. The amount of that subsidy? That would be $0.78 billion per year — enough to fund less than two hours of federal spending in 2011, and not even half the amount we are lending a foreign-owned and state-owned oil company for drilling offshore Brazil.
Oil companies already pay tax rates of 40-50% of income. For one company, Exxon, in one quarter of one year, that amount was over $8 billion, or almost double the so-called tax “subsidy” for all oil companies for an entire year.
Exxon recently released its first quarter results for 2011. The number grabbing the headlines was Exxon’s profit: $10.65 billion in a single quarter. The number not given quite as much exposure was the taxes it paid in that same quarter: $8 billion, or 42% of income before taxes.
And what does Exxon do with all that money it has left after paying $8 B in taxes? It put $7.8 billion into capital and exploration, as part of its plans “to invest between $33 billion and $37 billion per year over the next five years to develop new energy supplies.”
