Posted on 05/13/2011 8:50:52 AM PDT by Kaslin
As voters around the country wince at rising gas prices, panicked Democrats, in a rush to cover the failure of their all-or-nothing bet on the alternative energy industry have started singing a familiar tune – blame the oil and gas industry. Instead of facing the reality of his owned failed policies, President Obama is calling for an end to the "tax giveaways" he claims amount to $4 billion in “subsidies” to the energy industry.
This tactic isn’t surprising given the effect that rising gas prices have on the President’s approval ratings and his obsession with re-election. But, less than truthful innuendos and political spin hardly helps American working families that are getting hammered at the pump.
If our leaders are going to have an honest discussion about energy, it's important to clear up a few rumors, misconceptions and outright falsehoods being perpetrated about the oil and gas industry. Let's begin with three of the more common ones:
1. The industry doesn’t receive any taxpayer funded subsides. None.
2. Rampant speculation and Wall Street tricks aren’t driving up gas prices.
3. The oil and gas industry is not dodging the taxes they owe and withholding “their fair share”.
I'll say it again; contrary to popular opinion and the President's spin, oil and gas gets no taxpayer funded subsidies. The tax code does allow them certain tax credits and deductions to encourage continued investment in an industry that is heavily front-end loaded with capital expense. These are the same kind of incentives available to Coca-Cola, General Electric, Ford, and Micro-Soft and other companies doing business in the U.S. Or, for that matter, like the deduction for mortgage interest payments enjoyed by homeowners. But, importantly these are tax credits, and markedly different from direct taxpayer cash subsidies like the 45 cent per gallon payment blenders get to put ethanol in fuel mixes.
When businesses invest in America, we all benefit. The oil and gas industry plows about $300 billion into domestic projects per year – that's 75 times more than Obama's phantom "taxpayer giveaways" amount - and employees over 9 million people. Those are real numbers; not Washington spin, and if government would allow and encourage even more domestic production there would be more jobs and more investment – and more total taxes paid, too.
Another argument that often circulates when gas prices go up is that a phantom class of “Wall Street speculators” is to blame for the increase of prices. So pervasive was this school of thought that in 2008, President Bush commissioned an exhaustive review, via the Commodity Futures Trading Commission, of the effect that speculators had on market prices. Their conclusion was surprising, according to The Wall Street Journal, “The agency concluded that speculators—otherwise known as traders—were putting downward pressure on prices. The liquidity they provide helps to smooth volatility.”
Not satisfied with the 2008 study, President Obama recently resurrected this school of thought, even tapping Attorney General Eric Holder to police perceived illegal activity and price gouging. Yet within the Presidents’ own Administration, the Federal Trade Commission found that the recent spike in oil prices is due primarily to normal market forces, including booming demand from developing economies in India and China and not because of any questionable behavior from Wall Street.
The third popular attack is that somehow oil and gas industry isn’t paying its fair share in taxes. Democrat mythology aside, the oil and gas industry pays a much heftier percentage of net income in taxes (41.1%) than the average of all other S&P Industrials (26.5%). Every single day, the industry is sending more than $85 million to the U.S. Treasury for taxes and royalty payments. Yes, the energy companies are profitable, but their profit margins are right in line with manufacturing, aerospace, and food industries, while computer, pharmaceutical, and the beverage companies have triple the net income margins of traditional energy.
I don't like subsidies and I don't like Congress or the IRS deciding what is good economic behavior and what is bad. But, I do understand that you get more of what gets incentivized, and less of what is penalized. And, there is a huge difference in "redistributing the wealth" through direct subsidy payments, and a tax credit that encourages investment in much needed production that creates jobs and taxable income.
If congress is serious about creating jobs and jump starting the economy, they should lower the corporate tax rate, which is the highest among the 34 OECD nations, rather than increase the tax burden on energy or any industry.
Capital is fungible, and energy production is the prototypical global industry. Plenty of nations around the world are providing a far more welcoming business environment for energy production that the U.S. already with a less onerous tax code and far less regulatory burden.
If increasing our domestic supply is really a national objective, then this might not be the best time to send exactly the opposite message to the people that provide the capital to drill the wells.
It may well be good to apply across the entire economy, but the laser beam is on gas prices right now. Use the Left’s mantra against them, “Don’t let a crisis go unused.”
IMO, our energy future is to become isolationists and develop any and all resources and mandate that they be confined to the US economy, unless a huge tariff is applied to exports.
When Chukie “slime” Schumer was asking to select between student loans and the oil industry. The executive should have made reference to the very real jobs of the oil industry PAY BACK AND PAY FOR those student loans.
It also does not help when democrats support unemployment and prevent paying back those non-dischargable student loans.
Yes...the oil fairy delivers it...all we have to do is drill it and it replenishes overnight.
I don't agree with this concept. In the next decade or so, we will be a net exporter of Natural Gas (in my opinion). Trying to reduce that export only hurts us for jobs and trade balance.
obama will declare a gas tax holiday for 5 weeks. Starting Oct 1, 2012.
That's always been the sit..
Dispose of that broomstick up our collective a$$hat Mr. & Mrs. Scarecrow and jobs & oil will flow here like mothers milk.
IMHO...
Increases in the market price of crude oil are the symptom of the problem that previously 3rd-world nations, i.e., India, China, etc., are dramatically increasing their consumption as they move towards the western lifestyle which is so emphatically deplored publicly by the left wing.
If we (the U.S.) use more of our own domestically produced oil, that will only moderately decrease the market price of crude.
Every time we walk away from a foreign well, the new “Eastern-bloc”, i.e., enemies of America, proceed to commandeer the well and add it to their source of supply.
So far, enemies of America show only signs of increasing their per capita use of crude oil; there is no sign that they plan on decreasing.
As crude oil is very important to economic prosperity and military capability, it is strategically wise to garner as much of the world’s supply as possible at a low a cost as possible.
Bottom line, commodity prices that we experience are the symptom - the disease is a relative decrease between the rate of U.S. wealth gains versus foreign nations. The main stumbling block which is lowering our rate of wealth increase is our decreasing morality amongst the general public. The President, as all Democrats, was elected largely by the Democratic party voting base. And the core of that voting base is far-left, i.e., communist (notice the che guivera t-shirts on young people), anti-Christian, and deviant in it’s thoughts. “Blue-dog” Democrats are simply clinging to their party solely because of it’s name and heritage of being the party of their ancestors. That one can be a Christian or Jew and vote Democrat defies common sense given the platform planks of Robinhood, i.e., lying, government, institutionalized promotion of sexual deviance and excuses and acceptance of drug abuse, just to name three planks completely antithetical to both the Old and New Testaments. The rampant upswing of immoral thoughts and actions has seeped into schools, entertainment, and news, and government and business management as well. This produces a hollow leadership and vision that finds it impossible to do what is right for the nation but instead constantly makes a circus of politics, government handouts and movement of capital to foreign nations. These situations have been the end of every great empire, from Rome to Great Britain.
We can not and should not rely our government to maintain a wall of separation for domestic capital and labor. Our business leadership must, in the end, realize their responsibility towards the nation in which they do business and think in the long-term. Accordingly, the nation will prosper in spite of the necessary evil of having a government, and the citizens will continue to vote out elected representatives until they realize that the only real purpose they should fulfill is the military defense of the nation.
OK, so we export it. Tax the hell out of it. Jobs and the economy are not getting better with this model. Break it. Why be manipulated by foreign interest.
The trade balance is caused by buying foreign oil. Just stop it.
Putting a huge tarrif on it means the work goes somewhere else. We are not the only ones with Shale Gas, we just started developing our first. Already this is being developed in other countries. Why make us noncompetitive and send the jobs elsewhere.
The trade balance is caused by buying foreign oil. Just stop it.
Easier said than done. Are you just going to quit driving to work and the grocery store?
And then immediately declare a per mile use fee that dwarfs the gas tax...
Tax the purchaser and they'll buy it cheaper somewhere else. We are already taxing the oil companies.
I agree, we do need to be using our own oil.
My link does say it is the largest company by market value. You are right. I should have at least included that qualifier. Considering how business stories are handled outside the WSJ, the qualified statement is also probably suspect.
The issue seems to be the difference between the check they actually wrote to the feds and the elegance of accrual accounting required by FASB’s. I doubt few could read the cash flow statement, and it would not have helped the Times anyway to acquire that skill.
“The ‘tax benefit’ reported in our financial statements was the “U.S. current tax provision on continuing operations” which is a book accounting concept and is not the same as our cash tax liability or cash tax payments. There was a benefit in our current tax provision because we didn't’t end up owing taxes we had accrued in prior years. This tax benefit resulted from reversing the taxes we had accrued in prior years, but much of this benefit was offset by increases in our tax liability for future years.
As I read this thread, I realize that I am not well versed on this topic as most of the posters here.
It just seems to me that we are going to have to drill at some point. Zero encourages drilling by the people of Brazil. He states the we will be their 'best customer'. I have also heard (could be wrong) that our strategic reserve is only one year. It doesn't seem enough.
Keep in mind the Strategic Petroleum Reserve (SPR) doesn't have to replace all our oil supplies at the same time. War between Saudi Arabia and Iran might shut down the entire Persian Gulf, but it won't shut down Texas, Canada, Brazil, Nigeria or others.
The SPR holds 726 million barrels. Depending on what source we have to replace, depends on how much time it lasts. However, it cannot be less than 165 days because the maximum withdraw rate is 4.4 million barrels per day.
I guess this is REALLY bad news to the ETHANOL 'industry'!
Most folks think that businesses pay taxes.
They don't.
It is just another cost of doing business that is ADDED into the PRICE of their product.
The CUSTOMERS (you and me) 'pay' the taxes: the business merely COLLECTS them for the gummint.
You REALLY mean 2011...
Apr 21, 2011 ... The ethanol subsidy currently costs US taxpayers $6 billion annually
http://bioenergy.checkbiotech.org/news/bill_introduced_eliminate_ethanol_subsidy
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