Posted on 05/21/2008 8:08:44 AM PDT by Nachum
I believe America is the only country in the world where minerals do not automatically belong to the government.
We have substantial amounts of state and federal lands where the oil rights are owned by the government, but we have even more land where a private landowner owns those rights.
Either way, the oil companies have to obtain a lease on the minerals from whomever owns them, and pay a royalty on each barrel produced.
Congress moans and exhibits signs of uninary incontinence, about entities like OPEC, but there is a large country NOT in OPEC that is already one of the major oil producers in the world, and one that has the potential of vastly increasing its annual output, far more, in fact, than Saudi Arabia or even the Russian Federation.
There is one major obstacle to the expansion of the oil production within this country. And that is this very same Congress that sees only despair in the fearsome price of crude oil, and one of its products, gasoline.
...gulp, gulp, gulp...eat up your milk and cookies, after all just supply and demand and everyone from the oil companies to our government are looking out for your well being, there is no reason why both would not give a rats butt if there was no drilling, refineries being built, of course there isn’t...gulp, gulp, gulp....so tasty when you can rationalize it is alright when so many are bending you over and going to town on you, but of course, that is because it must be normal.....
Remember me when you get hit at the pump.
...this lends itself to the destruction of the US economy, so while you may wish to believe there is nothing wrong, this will hurt all of us, even you.
Early 1980's. Admittedly it been a while.The oil companies are public. Go buy you some stock.
Isn't the revenue gained by the government by taxing gasoline pegged at a fixed amount per gallon? If that is the case, the amount of taxes per gallon does not change when the price changes. If there is a significant price increase, that would mean a large deline in usage and government tax revenues from gasoline sales would actually decrease. You could argue that oil company revenues and increased profits are also taxable, but I believe that amount of dollars would be far less than getting tax revenue from consumer sales per gallon.
I don't believe that tax revenues are the incentive for the government forbidding oil exploration off the coast of California, or in Alaska.
State sales taxes per gallon, which ARE based on the dollar figure of the sale, DO change as the price rises. That is the bump windfall that the states have been keeping quiet about.
Federal taxrs on gasoline are LOWER per gallon than Diesel fuel, about 25% less. Yet Diesel fuel is the stuff that powers the machinery that brings us almost all our daily supplies, which you see reflected in the price of just about everything you get at the grocery store, or at the big-box building supply depot, or even your friendly neighborhood Wal-Mart. Even with the subsidy that Chinese laborers are giving us in their willingness to accept a pitifully small wage for turning out some pretty sophisticated machinery, prices are STILL rising, and the inflation is pervasive.
...I think you are right, it is fixed and not a percentage...does take some steam from my argument, although not all of it.
No you may not. The profit margin for "big oil" runs about 6% while the Federal Government collects about 18.6%. Work the numbers.
Regards,
GtG
PS That's the dirty little secret that Congress NEVER mentions.
This would mean huge revenue boosts for the states at the moment to make up for the huge losses due to an economic slowdown. The only problem with all of that logic, is that (at lease in California) there has been a nasty fight over any new drilling for at least the last 20 years and no new refineries. The increases we are feeling at the moment are relatively recent. Why hasn't the federal government pushed for more drilling on federally controlled land? The feds don't see any of the state money, so up until now you might think that they would want greater production, not less.
There is nothing to stop individual states from taxing gas on a percentage. California's gas tax is based on a percentage. I am not sure that this alone would drive the federal government to inhibit domestic production for the length of time we have done so. If you want to argue that the states themselves are pressuring the feds to sit on more production so they can generate more sales revenue from gas, I think that argument would fail in the end. If there are higher prices, than purchases will be less and that will reduce the amount of the windfall for state governments. Also, factor in the loss of business tax revenue from the economic slowdown. This is why I have a hard time believing that the federal government is tampering with production levels in order to generate more tax revenue.
It is probably a lot more stupid than that.
A. The companies themselves might like the windfall and be bribing public officials.
B. The politicians are afraid of the loss of votes from drilling in unpopular areas (ie. the coast of California, or pristine wildlife preserves, or untouched natural parks)
C. Getting the politicians in Washington to do ANYTHING worthwhile on the topic of energy is like herding cats...
Nope. That would mean that after expenses and the $30b in monies extorted by governments, they were fortunate to have $10b left over for the stockholders.
Commensurate with a 400% increase in revenues... Or do you demand that businesses accept declining profits when revenues increase?
Revenue is up, profits are up. And the profit margin for EXO has been quite stable over the years, running between 8% and 12% of total revenues (right now, it's around 10%).
The government's getting an ever-increasing chunk of the pie, though...
Oil wells deplete. You have to replace depleted reserves with new ones or you will have no product to sell. Oil companies will drill new wells somewhere to replace those depleted reserves, wherever the potential for a favorable ROI is best, and for larger international companies looking for the next Prudhoe Bay, that is often NOT here because the most likely areas to find oilfields of sufficient scale to pay off the initial investment of gathering data and cost of the specialized equipment needed to operate will not be recouped by small fields.
Most of the oil companies I have worked for as a consultant in the US were smaller to intermediate sized companies, up to the size of Hess or Hunt (but mostly much smaller), who can get a favorable ROI here in the US onshore drilling smaller prospects and who cannot afford the capital investment required to drill somewhere like Gabon or the North Sea.
Regardless of scale, if the demand is there but you do not have the production, you have nothing to sell. You can't make any money that way.
Agreed that is applicable in the long term...In the short term, the oil companies, those who own the stocks (including elected official, their family and friends) are more then willing to ride this wave and squeeze as much increased profit out of it as they can. Mind you, the greatest problem is the government who will not allow drilling, new refineries to be built. I believe the motives for such on both sides of the aisle are very suspect, and not just for environmental concerns.
OK, when your income goes up, and you put more in your IRA or savings account, why do you expect the same return? Hey, your income is up 50%, your contribution to savings is up 50%, so we’re going to cut your savings rate by 50%... You don’t “need” the money.
Better yet, I’m going to expect you to double your productivity so you can double your output at work. But I’m not going to pay you more! No, after all, you’re making a fair wage now, and even if you make the company more money, you really don’t NEED that extra money, because there are other people who don’t make as much, and well if you can buy things that they can’t and make it harder for your neighbor to keep up...
So what profit margin would be acceptable to you? How much is enough? Put down in numbers what EXO should make each year. Then I get to put down in numbers what YOU get to make each year. Sound fair? Does it even sound Constitutional, or conservative?
You got it basically right, though, when you stated the problem isn’t the oil companies, the problem is the price the oil companies are being charged. So rather than your approach (or the other blame-Big-Oil folks on this thread) of forcing the oil companies to cut their profits, we need to look at access for them to get lower cost of crude.
Remember, if EXO cut ALL their profit and gave you a discount on gas, it would save you about $0.12 per gallon. If the Feds cut the taxes they charge EXO, that would save you $0.36 per gallon. If the Feds cut the taxes they charge EXO AND they charge you for that gallon of gas, it would save you $0.55 per gallon. If the Feds AND the State (average, assuming you live on the coasts) cut their taxes on EXO and that gallon of gas, you’d save nearly $1.00 per gallon.
EXO can give you every penny of profit on that gallon, and you barely get back a dime. If the various governments did the same thing - remove all taxation on that gallon of gas - you’d save a buck. BIG difference.
How do we address the fundamental problem - supply? By drilling, that means opening up the US. There’s tens of billions of barrels of proven reserves here, and hundreds of billions of potential reserves that we can’t even look for.
How that changes is with a POLITICAL situation. Not by beating up “Big Oil”. The reason you are paying $4.00 per gallon lies with 535 (well, probably 380 - the other 155 are rational) suits sitting in Congress. The very ones bitching and whining about the cost of gas ARE the reason it is what it is!
Understand two important facts when thinking of “Big Oil” supposedly screwing the little man:
1. EXO pays more in taxes than the bottom 50% of all income tax payers in the US COMBINED. ONE COMPANY paid more in Federal taxes than 150 MILLION US taxpayers COMBINED. Think about that for a minute.
2. The big 5 oil companies pay 20% of the total tax receipts received by the Federal Government. Stop - think. Go down to your SS office, or DHS, or other Federal office. Go to your local military base. Count out 5 people. ONE OF THEM is DIRECTLY FUNDED by those “Evil Big Oil” companies. Twenty percent. One in five.
You want to know why the Feds are going after Big Oil? Because of number 1, it’s politically expedient - you’ll get at least half the population behind you, and a good chunk of that other half that believe in conspiracies, and that the executives of Big Oil get together every month to decide how much more to turn the screw.
And because of number 2, the Fed will NEVER ease up on Big Oil - too much of their pie comes from YOU AND ME via Big Oil. That money is OURS, not the Feds. Remember the opening truth - Big Oil keeps their profit margin as costs increase; they simply pass those costs on to the consumer. Whether those costs are raw (crude) or taxation.
Energy taxes are a stealth 20% - TWENTY PERCENT! - of the Federal budget. It’s a way for those suits in Congress to increase your tax burden by an extra dollar for every five dollars you already pay, without you realizing it. And at the same time YOU get upset at “Evil Big Oil” because the price.
So Congress launches “investigations” to assuage the population, keep them dumb and happy that something is being done. And starts talking about windfall profits taxes.
Guess who will pay that windfall profits tax? Not Big Oil! YOU! ExxonMobil, Shell, Texaco, BP will keep their profit margin. If they don’t, their stock price goes down and that hurts hundreds of millions of investors (of which, you’re probably one). So they will simply increase the prices they charge to keep that profit margin. So the windfall profits tax will become a charge-through to the customer - YOU. YOU will pay that tax.
And now Congress, rather than getting just 20% of their budget from the Big Oil, will get 22%. And your tax burden goes ever higher, without you even knowing they just hit you.
More importantly, because Big Oil will increase their prices to cover the windfall profits tax, YOU will pay more for that gallon of gas and you’ll get more upset at “Evil Big Oil”, thereby giving Congress the “authority” to increase the taxation even further to “stick it to Evil Big Oil!”. Which only turns around and sticks your own pockets.
Yes, it’s a bump-and-grab game. Congress pushes Big Oil into you, so you get mad at getting bumped by Big Oil. And Congress picks your pocket while you’re distracted. Then it does it again, and again, and again. All the while you’re getting more and more upset at Big Oil.
Never mind you OWN Big Oil! A goodly reason your investments are doing well is because you own a chunk of Big Oil (either directly via direct stock, or indirectly via investment funds). No, you’ll keep getting upset at Big Oil, never paying attention to the person really causing the problem.
Remember, businesses exist to make money. It’s what they pay their investors with (the people who OWN the company), and it’s what they pay their workers and suppliers with. Ask your boss if he’s willing to double revenue and half his profit margin. He makes the same money, right? But for twice the work...
Demanding the oil companies take a smaller chunk (and 10% is pretty much in line with most industries) is essentially communism. Socialism. Price controls. The antithesis of conservatism and free markets. Wash the idea out of your mind, immediately!
No, the price of gas is DIRECTLY LAID at the feet of Congress. Their subservience to the environmental lobby (a small part) and the NIMBYs of this nation (the larger part, I believe) and their addiction to OUR DOLLARS via their taxation of Big Oil is the reason gas is high.
Congress could cut the price of raw crude very easily - allow more to be drilled and pumped. But that would reduce their income AND be politically difficult, so they’ll stay on the gravy train, not make waves with Joe Public, and try to shift the blame to “Evil Big Oil” so the truth doesn’t get out.
It should be EXTREMELY TELLING to see how Congress (and unfortunately, a lot of FReepers) reacted to John McCain’s call for a Federal Tax holiday on oil taxes this summer. Disdain, and calls that the tax be “covered by Big Oil”, so the Fed still gets their income. Which means YOU still PAY THAT TAX.
If Congress really cared about you and the price of gas, they’d take McCain up on his proposal, and open up exploration and drilling in the US. But no, that’s politically difficult (someone might not like to see the derricks pumping away), and it would affect their cash stream meaning they have to decide which programs to cut or restrict, which is also difficult (because you’d piss off some constituency).
No, they’ll deflect and work the crowd into a lather about “Evil Big Oil” and keep taxing YOU, and even get YOU to chant with them to PAY MORE TAXES - meaning you fork over more money.
After all, half the taxpayers combined pay less tax than EXO does. Who do you think makes a bigger voting bloc, to keep those Congressmen in power?
Congress - not Big Oil execs - should be called on the carpet to explain why they insist on the high costs of gas.
The fault lies with our elected officials. I truly believe the reason why they refuse to drill goes well beyond NIMBY, Environmentalist...and rests mainly with the government taxable revenue being secured off the price as it goes up, and their own, their families and friends personal wealth increasing by owning these greater valued oil stocks. I can not for the life of me understand how a person who is to "regulate an industry" can have ownership in that industry. The conflict is obvious and startling.
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