Nobody Loves Big Oil Companies, Except Their Shareholders.

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The big five oil companies were grilled at a Congressional hearing about their record profits yesterday. Their apparent crime? Making too much money.

http://cdn.news.aol.com/aolnews_photos/08/02/20070112114809990004

Congressional Democrats do not think that oil companies, especially the world's biggest private oil company Exxon Mobil, are investing enough money in renewable fuels. So Rep. Ed Markey (D-Mass.), chairman of the Select Committee on Energy Independence and Global Warming, urged the oil companies to spend ten percent of their profits on developing renewable energy supplies.

As the Houston Chronicle notes:

House Democrats had telegraphed the kind of reception the executives could anticipate with the hearing's title — "Drilling for Answers: Oil Company Profits, Runaway Prices and the Pursuit of Alternatives."

And the hearing lived up to expectations in what proved to be an often-testy exchange.

Markey quickly went after Exxon Mobil, asking why a company that earned more than $40 billion last year — the most ever earned by a U.S. company — has plans to invest only $100 million over 10 years in renewables and alternative energy programs.

Simon said company officials examined a range of alternative energy sources a number of years ago and were unsatisfied with their potential.

Instead, Simon said, company officials want to focus on leapfrogging current technologies and find a breakthrough for the world's energy concerns.

"The current technology does not have any appreciable impact on this challenge," Simon said.

Democrats pointed to the commitments BP and Shell have been making in alternative energy sources.

Markey wants them to do more, though, and invest at least 10 percent of their profits in renewables and alternative energy sources.

But early Tuesday, at Washington's Center for Strategic and International Studies, Jeroen van der Veer, chief executive officer of Netherlands-based Royal Dutch Shell, warned against sinking too much cash on alternatives such as biofuels if they cannot be competitive in the marketplace.

"There is no point to spend billions of dollars on a technology that is too expensive for consumers," van der Veer said.

The Congressional panel also wants the oil companies to give up $18 billion in "subsidies." Of course, there shouldn't be any corporate welfare, period. But as the Wall Street Journal points out:

Mr. Markey also used the occasion to threaten special tax increases, grilling the executives about $18 billion in "subsidies," which are actually a tax deduction that Congress itself extended to all manufacturers, including Big Oil

Interestingly, the Journal also notes that higher gasoline prices is exactly what would happen if Congress enacts proposed global warming policies.

Finally, if Congress wants to blame someone for high oil prices, blame the benighted oil producing countries that have underinvested in oil production for at least a decade. But Congressional grandstanders can't haul the likes of Venezuela's Chavez, Russia's Putin, and Iran's Ahmadinejad to their hearing rooms. 

The whole Houston Chronicle article here.

Disclosure: Yes, I'm in thrall to Big Oil to the extent that I still own those 50 shares of Exxon Mobil. And I should also mention that I have this silly belief that the chief business of business is to make profits for shareholders by satisfying the legitimate needs of their customers, not bowing and scraping to the whims of Congresspeople

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  1. As an XOM shareholder, I agree with this headline.

    Disclosure: I own more than Ron does

  2. Anybody want to bet on when we first start seeing formal price controls?

  3. I’m a little unclear:

    How will diverting oil company revenues to uses deemed uneconomic by those with a fiduciary responsibility to shareholders (thus resulting in a weaker bottom line) result in those companies charging lower gasoline prices?

    How will barring oil companies from taking tax deductions (thus resulting in a weaker bottom line)result in those companies charging lower gasoline prices?

    In all their concern over higher gasoline prices, how did the lawmakers overlook a cut in gasoline taxes as a surefire way to give relief to consumers?

  4. Disclosure: I don’t own any Exxon (dammit), but I do own shares in a couple of small oil exploration tech companies. They haven’t done as well as I hoped.

  5. How will diverting oil company revenues to uses deemed uneconomic by those with a fiduciary responsibility to shareholders (thus resulting in a weaker bottom line) result in those companies charging lower gasoline prices?

    Not only that, wont it open them up to a shareholder lawsuit? If they follow congress’ advice, can I sue congress too?

  6. You’re just a shill for Big Shareholder!

  7. The big five oil companies were grilled at a Congressional hearing about their record profits yesterday. Their apparent crime? Making too much money.

    What about the crime of taking subsidies from the government?

  8. What about the crime of taking subsidies from the government?

    Has congress passed next year’s budget yet? If not, this seems easy to fix.

  9. I’m happy to say I bought energy shares when Pres. Bush decided to invade Iraq, and that it’s been the best investment I ever made.

    Fact is, less than 15% of the world’s oil reserves are owned by “big oil.” The rest is owned by countries. For instance, Mexico.
    Which has – due to nationalistic pride and
    socialistic economics – done little to cause Pemex to look for new oil or use better recovery techniques to boost production.
    For every $100 in export sales my company has to the Canadians, we sell $.01 to the Mexicans.
    I’ll believe Cong. Markey’s heart is in the right place, when lines up his fellow congressmen and they open ANWR, the shelves,
    western shale, etc.

  10. Clearly the answer to high gas prices is to ensure that no one makes any money from producing oil. Yeah that will work.

  11. The prevailing dem view of taxation, with growing agreement from the rep side is that any dollar not collected in taxes is really a ‘tax expenditure’.

    Ergo, raising taxes reduces expenditures…capeesh?

  12. Jennifer,

    Those worked so well in the 70s.

  13. creech,

    STate ownership of oil resources is a real problem. The fact is that the socialists in Mexico and Venezuala and the religious fanatics in Iran are getting to the point where they are both too lazy and too stupid to actually pump the stuff out of the ground. All three of those countries’ production is well below what it should be.

  14. Finally, if Congress wants to blame someone for high oil prices, blame the benighted oil producing countries that have underinvested in oil production for at least a decade.

    When in doubt .. blame the Arabs. Wasn’t crude oil trading for less than 10 dollars less than a decade ago? How did under-investing in increased production change that so suddenly?

  15. “How will diverting oil company revenues to uses deemed uneconomic by those with a fiduciary responsibility to shareholders (thus resulting in a weaker bottom line) result in those companies charging lower gasoline prices?”

    Oversimplification: Oil companies may not want to support the development of new energies and technologies that would one day cut into their gasoline business. It would only make sense if they could guarantee that they would retain control of the new technologies, which may be impossible. If new energy sources cut into gasoline sales, prices would drop due to lowered demand. it’s not just about the investment of capital being bad for the bottom line, it’s about the REASON it is bad for the bottom line. Renewables are a good investment, just not for oil companies.

    That said, I fully support their right to invest their capital wherever the hell they see fit.

  16. Their apparent crime? Making too much money.

    To me, the problem is that they keep insisting that they require government subsidies. In fact even during their hearing they insisted that the government subsidies are required because of the cyclical nature of markets and that the profits they are enjoying now aren’t guaranteed into the future.

    Seems to me that if you are gonna argue that they are entitled to all the profits they can get (which they are) they also are entitiled to uncertain future conditions and are entitled to have their profits slashed if market conditions change.

    You won’t be taken seriously if you are gonna argue that they should maximize profits but aren’t willing to argue at the same time that they don’t deserve the subsidies and sweetheart deals they get.

    (I believe they also get sweetheart deals on the rates they pay for government land — I may be wrong on this one, but I remember reading something like this)

  17. XOM paid about $80 billion in taxes over the last three years. They must own very small guns.

  18. The fact is that the socialists in Mexico and Venezuala and the religious fanatics in Iran are getting to the point where they are both too lazy and too stupid to actually pump the stuff out of the ground.

    Did their oil revenues decline or increase? May be they are not the stupid ones John.

  19. Given that the largest shareholders of ExxonMobil are banks and mutual funds, I’m guessing a whole lot of people have a vested interest in making sure XOM does well.

  20. “When in doubt .. blame the Arabs. Wasn’t crude oil trading for less than 10 dollars less than a decade ago? How did under-investing in increased production change that so suddenly?”

    I don’t know if it was $10 but it was pretty damned low in 1998. Oil is a boom and bust business. Oil is just as likely to go right back down to $10 as it is to stay at $100. You have to let people make money when the market is up. Yeah, they are making big money right now and they are drilling like there is no tomorrow which will increase supply and lead to another bust. Clearly what Congress needs to do is put an end to profits so drilling and exploration get cut off and oil prices stay higher. Frankly, I wouldn’t be surprised if the whole damn thing was put on at the behest of the oil companies. Think about it, who benefits most from doing things like stopping drilling in ANWAR and big taxes on oil profits that keep smaller companies from investing in exploration?

  21. “Did their oil revenues decline or increase? May be they are not the stupid ones John.”

    The would be true if the price went up because of their cuts in production. But that is not what happened. The boom in oil prices has only served to paper over their incompetence. Further, had they not been such morons they could be making even more money than they are now. When the bust hits, they are really going to be hurting.

  22. Oil companies receive subsidies? that’s absurd. Anybody know more specifics? How can Congress hold hearings about their too-big profits while subsidizing them in ANY way?

  23. “You won’t be taken seriously if you are gonna argue that they should maximize profits but aren’t willing to argue at the same time that they don’t deserve the subsidies and sweetheart deals they get.”

    Fine, lets kill all of the subsidies. But while we are doing that lets open up ANWAR and the gulf coast to more drilling. Those restrictions function as an effective subsidy for companies like Exon by making existing reserves that much more valuable.

  24. From this AP article:

    Appearing before a House committee, the executives were pressed to explain why they should continue to get billions of dollars in tax breaks when they made $123 billion last year and motorists are paying record gasoline prices at the pump.

    “Our earnings, although high in absolute terms, need to be viewed in the context of the scale and cyclical, long-term nature of our industry as well as the huge investment requirements,” said J.S. Simon, senior vice president of Exxon Mobil Corp., which made a record $40 billion last year.

    That’s an interesting way at looking at free markets

  25. “Appearing before a House committee, the executives were pressed to explain why they should continue to get billions of dollars in tax breaks”

    What tax breaks? Further, what industry doesn’t get “tax breaks”? Just because the government takes less of the money you lawfully earned does not mean it is giving you a subsidy.

  26. Tax breaks are not the same as subsidies.

  27. beat me to it.

  28. Fine, lets kill all of the subsidies. But while we are doing that lets open up ANWAR and the gulf coast to more drilling. Those restrictions function as an effective subsidy for companies like Exon by making existing reserves that much more valuable.

    One Golden Goose at a time please. Let’s kill the subsidies and see what happens from there.

    I don’t find it improper that the government is trying to protect Wildlife Refuges from being industrialized. Conservation is a proper function of the government. Whether that amounts to an advantage ( which is a highly suspect claim anyway — if it helping keep prices higher oil companies wouldn’t be clamoring to drill there) is besides the point.

    I’m sure some areas would have lower land/housing costs if we developed all forested areas, but that doesn’t mean protecting forests and parks is a bad idea.

  29. What is Ed Markey’s experience in productive investing? What is his staff’s expertise in productive investing?

    Hey, dumbass congressman, Exxon-Mobil is in the oil business. Their experience is best suited for locating, extracting, refining and marketing oil and oil products. Why is this so friggin’ hard for you to understand? If renewables and alternative energy programs are such a grand investment idea put your own money up, Rep. Markey. Not Exxopn-Mobil’s, not the taxpayer’s, your own damn money.

  30. Tax breaks are not the same as subsidies.

    Call it what you will…they are paying less than they should be. Lowering their tax liability is essentially a subsidy.

  31. I don’t find it improper that the government is trying to protect Wildlife Refuges from being industrialized.

    Who want’s to put steel mills, auto factories, refineries, and chemical plants in ANWAR? We talking about drilling for oil, not moving Cleveland there.

  32. While we are killing off the subsidies (which Im all for), lets make sure we kill them off for all the industries with higher margins than the oil industry.

    We can wait and discuss the subsidies for those lower margin industries until next year.

    Actually, if you are going to go after subsidies, wouldnt this be the way to do it? Start at highest margin and work your way down? Oil would be way down the line if that was the methodology.

  33. Tax breaks may not be exactly subsidies, but if one group of producers gets them but those producing competing products don’t (or those producing similar products in a different jurisdiction) then it’s certainly a thumb on the scales of competition. More generally, if profits from one activity are taxed differently than profits from another activity, investment decisions will be skewed.

    Call it what you will, but it’s definitely a thumb on the scales of the market.

  34. JsubD,

    Since SuisseBank has forclosed on all of Cleveland, those people need to move somewhere.

  35. “There is no point to spend billions of dollars on a technology that is too expensive for consumers,” van der Veer said.

    Really? Someone tell that to every tech company out there. With attitudes like that, Plasma TVs would have never been invented. Who was going to pay upwards of 15K for a TV, right?

    Who want’s to put steel mills, auto factories, refineries, and chemical plants in ANWAR? We talking about drilling for oil, not moving Cleveland there.

    yeah, drilling for oil is such a clean enterprise that I’m sure it wouldn’t affect nature at all.

  36. Deutsche Bank not CreditSuisse.

    I combined them somehow.

  37. All: Just a reminder that I explicitly came out against ALL corporate welfare in the post.

    As for tax breaks, I expect everyone of you who complained about the general manufacturing tax deductions of the sort oil companies receive to give up your personal deductions and that those of you with children will forgo taking the dependent child deduction. 😉

  38. Really? Someone tell that to every tech company out there. With attitudes like that, Plasma TVs would have never been invented. Who was going to pay upwards of 15K for a TV, right?

    Chicago Tom,
    If you’re still within communicator range, what did the government have to do with investing in LCD and home entertainment technology? Did the US congress call silicon valley execs up on Capitol Hill and browbeat them for failing to invest enough in entertainment electronics? I missed that spectacle. Perhaps you can provide a link.

  39. Ron-

    What I favor is simplification of the tax code, so that there are fewer exceptions but lower rates. The personal exemption doesn’t bother me as much because (as I understand it) everybody gets one. It doesn’t put a thumb on any scales. OTOH, if certain business sectors get a tax break but not others, that’s a thumb on the scales of competition and investment decisions.

  40. As for tax breaks, I expect everyone of you who complained about the general manufacturing tax deductions of the sort oil companies receive to give up your personal deductions and that those of you with children will forgo taking the dependent child deduction. 😉

    I won’t forego any deductions I’m legally eligible for. I will support eliminating the lot of them. Even the one for the blind.

  41. “Drilling for Answers: Oil Company Profits, Runaway Prices and the Pursuit of Alternatives.”

    The original title was “Reaming the Blood-Sucking Oil Ghouls With a Red-Hot Poker” but some of moderates on the panel thought it a bit too indelicate.

  42. Anybody want to bet on when we first start seeing formal price controls?

    Ooh Ooh, I know that one.
    That would be the day before gasoline shortages become commonplace.

  43. thoreau: Tax simplification–great idea–but then how would Congress reward its friends with tax breaks and punish its enemies with tax hikes?

    According to the WSJ, the tax deduction is not targeted to oil companies, but applies to all domestic manufacturers. I do think that the oil depletion allowance should be eliminated.

  44. Didn’t that, or some recent, article mention that ExxonMobil paid more in US taxes last quarter than their US profit?

    Maybe I misheard that on the radio this AM.

    Anyway, Ron wrote the bot about the taxes being a regular business deduction right up there in his treatment of the story. Why some have to jerk straight to that “subsidies” term is beyond me. If people can’t tell the difference then they need to find a new topic. It is like calling a 1972 Charger a hybrid!

  45. The elephant in the living room of oil policy is our policy in the Middle East. The effects are perhaps not as simple as some on the left would like to claim, given that in much of the Middle East the production of oil is controlled by the state rather than American firms. Still, if anybody wants to bring sanity to oil policy, the trillions that we have spent supporting, defending, removing, replacing, and generally messing with various regimes is not to be disregarded.

    Mind you, I don’t think that the war in Iraq will do that much for US oil firms (the place is too chaotic for them to do much, although they will benefit from higher oil prices due to the chaos). Still, if there were no oil there I suspect the place would not be a target for US intervention. No so much because we’re there to steal it (see what I just wrote) but because conflicts are only really significant when they happen in a place with resources.

  46. No plagiarized bumper stickers masquerading as comments.

  47. yeah, drilling for oil is such a clean enterprise that I’m sure it wouldn’t affect nature at all.

    According to Wikipedia, there are 19,049,236 acres in ANWAR.

    Thanks to modern drilling techniques, the oil companies will need about 640 (1 square mile) acres to drill.

    That will leave 19,048,596 acres in a pristine state as Gaia intended.

  48. So ANWAR comes up again. Can anyone say how much recoverable oil would be available in that one square mile? If the upper (and optimistic) esitmate of in the smaller area considered for drilling is a bit over 10 billion barrels. We’re using what? 20 million bbls a day…so just doing the math on my scratch pad here…that oil would last about 500 days. If we get ALL of the ANWAR oil, maybe 16 billion bbls..that’s..licks pencil lead…lalalalla..that’s 800 days…or a bit over two years… Yah us! Then what?

  49. Can anyone say how much recoverable oil would be available in that one square mile?

    With modern drilling techniques, a hell of a lot more than actually sits under that square mile.

  50. I was showing how much is actually there, in total, government estimates at 16 Bil BBLs total…I realise that ANWAR wouldn’t be our only resource, but it isn’t very much.

    And the one square mile thing sounds great, but how are you going to get from that one square mile to another pipeline?

    Do you all actually know what ANWAR looks like?

  51. With modern drilling techniques, a hell of a lot more than actually sits under that square mile.

    Are you saying that the harder environmentalists fights, the more enviro-friendly oil drilling technology becomes? That is pretty deep, actually, RCD.

  52. Capelza, I believe furthur exploration has been banned, so no one knows exactly how much is there.

  53. I saw a program the other night that showed a capped test well that Chevron drilled in ANWAR years ago. Chevron admits it is theirs . When asked what they found, the spokesman did a great impression of Schultz. “I know nothing!”

  54. Do you all actually know what ANWAR looks like?

    IIRC, a desolate, featureless, tundra.

  55. It may be a long time coming, but when an alternative energy supply is found and it WILL BE. I myself will laugh like hell at any investor and all the blood sucking people in the commodities market as well as at all the Sheikdom’s that produce oil. I CAN’T WAIT–SUCK ON THAT EXXON/MOBIL!

  56. $18 billion in subsidies is nothing compared to the hundreds of billions the industry receives every year in the form of federal, state, and local funding for roads – oil’s most important complement good.

  57. According to Wikipedia, there are 19,049,236 acres in ANWAR.

    Thanks to modern drilling techniques, the oil companies will need about 640 (1 square mile) acres to drill.

    That will leave 19,048,596 acres in a pristine state as Gaia intended.

    Thanks to our flying cars and teleporter beams, there will be no need for “roads” or “pipelines” or any of those 20th century things that might increase the ecological footprint!

    And it’s beautiful country, if you like Arctic wilderness. The local wildlife seems to dig it. Some people call it ugly, but then Michael Crichton called the California redwoods a useless wasteland. There’s no accounting for tastes.

    Finally, capelza is right — the oil in ANWAR ain’t much when you spread it across the country. Drilling in ANWAR is to the oil crisis as earmark reform is to the budget deficit — a usefully distracting tidbit.

  58. Capelza- your post assumes that drilling in ANWR would be the only source of oil for the United States. It would be impossible to drill 20 million barrels in ANWR every day. It would be one of hundreds of sources. So the total supply would last for many years. And there is probably a lot more than 16 billion barrels worth of oil.

  59. Clearly the answer to high gas prices is to ensure that no one makes any money from producing oil. Yeah that will work.

    Too bad the public is not educated on economics.

  60. Gas prices in Europe are much higher than here.

    Why isn’t the Parliament in London holding similar hearings?

  61. To me, the problem is that they keep insisting that they require government subsidies.

    Tax breaks are NOT subsidies. A Subsidy is a payment. A Tax Break is just the government stealing less money – if a mugger takes only half your wallet, could he say he “subsidized” you?

    Thoreau,
    Mind you, I don’t think that the war in Iraq will do that much for US oil firms (the place is too chaotic for them to do much, although they will benefit from higher oil prices due to the chaos). Still, if there were no oil there I suspect the place would not be a target for US intervention. No so much because we’re there to steal it (see what I just wrote) but because conflicts are only really significant when they happen in a place with resources.

    The US Gov does not invade a country for its resources, it does it out of purely political motives: to give it more power. War is the health of the State. Think about why the US Gov invaded Somalia, the sphincter of the World, or Bosnia, or Afghanistan, or Grenada, or Vietnam… none of those countries offered resources. The wars did offer, however, more powers to the State, bigger budgets, greater encroachment over our rights. That is how Leviathan feeds.

  62. I’ll never understand the drill in ANWR crowd. There’s some oil there , but not a lot. It’s much easier and cheaper to drill in many other places than there. And even we could extract all of it, it’s not that much oil.

    But where’s the flaw in this logic?

    Oil is a finite resource.

    There are some reserves in the US, but not as much as in the rest of the world.

    It’s more expensive to extract our oil than it would be to import from other countries.

    Why wouldn’t we want to exhaust other’s resources first and have the last barrels of oil?

    Meanwhile, congress and the president have conspired to make ethanol, a fuel no American really wants, the hot commodity out there. Farmers are planting corn like it’s going out of style because the price is now so high. It’s filtering down into the rest of the food chain raising the cost of all food.

    If that weren’t enough, our panic over immigration is going to eventually lead to even higher prices when there’s no one left to pick the fruit or slaughter the cows. The logical result of this will be the “outsourcing” of our food supply to other countries that have a ready supply of labor.

    So Congress is working hard to raise the cost of energy (under the guise of global warming) while at the same time they bitch to oil companies the price of gas is too high. Meanwhile the policy they’ve instituted to increase “energy independence” will markedly increase the cost of food and may result in us importing food.

    With friends like this, who needs enemies?

  63. Chicago Tom said,

    (I believe they also get sweetheart deals on the rates they pay for government land — I may be wrong on this one, but I remember reading something like this)

    Yep, your wrong.

    They turn in sealed bids in an auction for the right to explore on government ground. If they make a discovery they pay the government around 12% of the value of each barrel of oil they produce.

  64. ed,

    Snort, unfortunately your comment is perilously close to the truth.

  65. The environmental groups have fought and continue to fight drilling in ANWR with a bloody purple passion.

    At the same time they have supported the much more environmentally destructive biofuels.

    So they have preserved frigid artic boglands with little biodiversity while supporting the destruction of rainforests and prairie with lots of biodiversity.

    The mind boggles.

  66. I really don’t care if ANWR is drilled or not.

    However, the spectacle of congress

    1. First calling the oil execs to Washington to brow beat them over not producing enough domestic oil one week.

    2. Turning around the very next week and voting against allowing exploration in ANWR

    Tells you want a bunch of pukeworthy hacks we have in congress.

  67. Handy facts on the oil industry. Lots of pretty pictures.

    Obama, Big Oil and fun with charts

  68. The third photo down on the link below gives a good example of the horrible destruction oil drilling has caused to the caribou in Alaska.

    Caribou destruction

  69. Chicago Tom,

    The criminally sweetheart deals you might have heard about are in mining on public lands.

    But you are somewhat correct. There is no reason for the 12% cap on royalties. 12% should be the floor and all companies are welcome to bid over the 12% to secure the right to the land we all own.

  70. nebby:

    “There is no reason for the 12% cap on royalties. 12% should be the floor and all companies are welcome to bid over the 12% to secure the right to the land we all own.”

    Economically speaking, a bidding auction, and a royalty regime are both intended to capture the buyer’s excess profit potential.

    Unfortunately, there is only so much excess profit potential to be caputured, so imposing a higher royalty rate results in lower bids, and vice versa.

    TANSTAAFL.

  71. I netted over $400 this past year in XOM dividends… pretty good for a gay man!!

  72. Anybody want to bet on when we first start seeing formal price controls?

    Briefly had them in Hawaii. Caused higher prices, problems with buying gas when convenient, shit like that. Got repealed a year later.

  73. I wonder if anyone at the hearing mentioned that federal and state gas taxes comprise a far larger percentage of the retail price of a gallon of gas than oil company profits do.

    Or that oil compnay profit MARGINS are lower than those of many other companies (such as Microsoft). The demagogues and their helpers in the press keep squawking about the dollar amount of profits Exxon makes and never mention that is a function of the size and scale of the industry – or compare number to how much Exxon pays in corporate taxes.

    As for the people who keep saying that drilling in ANWAR is not the answer – no one said it was the whole answer. It is part of the answer along with opening up more of the outer continental shelf for exploration and drilling and exploiting the enormous amount of oil locked up in oil shale deposits in the western U.S. (estimated at 3 times the total oil reserves of Saudia Arabia). We can also make synthetic gasoline from coal. We have plenty of that. The germans were doing that back in WW2.

  74. And it’s beautiful country, if you like Arctic wilderness.

    The east side of Detroit is beautiful country, if you like abandoned and burnt out buildings.
    Your point?

  75. Subsidy Subsidy Subsidy

    I recall that NY (or was it NYC) had a big problem with their citizens traveling to New Jersey malls to by clothes and escape the high taxes on their own side of the border.

    Apparently the news writers were aware that this is a ‘subsidy’ when it comes to a corporation, but not when it comes to an individual. Forgot the ‘nasty’ word they used instead.

  76. If ANWR can’t solve our oil problems then we better get back to some old-school oil capturing from the sea. Train oil, sperm oil, we need it all!

  77. I wonder if anyone at the hearing mentioned that federal and state gas taxes comprise a far larger percentage of the retail price of a gallon of gas than oil company profits do.

    Because the way to return to market-based energy and transportation allocation would be to reduce the costs of road-building paid by consumers from about 60% (which it currently is – gas taxes cover nowhere near the entire cost of building and maintaining all of the otherwise-free roads) to 0%. Excellent idea! I’ll bring it up at the next meaning of Vulgar Libertarians.

  78. Disclosure: Yes, I’m in thrall to Big Oil to the extent that I still own those 50 shares of Exxon Mobil. And I should also mention that I have this silly belief that the chief business of business is to make profits for shareholders by satisfying the legitimate needs of their customers, not bowing and scraping to the whims of Congresspeople

    …and you believe that the enforcement and decision of what is legitimate is entirely unrelated to the opinions of the people’s elected representatives, and hope that the market will take your personal definition of legitimacy into account, even if there are no incentive structures–like being beholden to the elected representatives of the people–that might possibly do it.

  79. “Because the way to return to market-based energy and transportation allocation would be to reduce the costs of road-building paid by consumers from about 60% (which it currently is – gas taxes cover nowhere near the entire cost of building and maintaining all of the otherwise-free roads) to 0%. Excellent idea! I’ll bring it up at the next meaning of Vulgar Libertarians.”

    Did I say anything about eliminating gas taxes?

    The point was to put the oil companies alleged “excessive” profits that the blowhards in Congress are ranting about in perspective to the amount that consumers are paying to government in taxes.

    Have you got any proof that gas taxes only cover about 60% of road construction and maintainence?

    Gas tax revenue has been siphoned off to pay for mass-transit boondogles and taxapayers of all types have been overcharged for construction projects (roads and everthing else) for about 70 years and counting because of the Davis-Bacon Act – a massive political giveaway to labor unions.

  80. I’ll make this comparison once again, since it’s germane to the topic once again. Think of drilling for oil like being in a room full of shelled peanuts. At first it’s real easy to shell the peanuts and eat them, but as you discard the shells the peanuts get harder and harder to find. Soon enough it’s not worth the time and effort to find those last few peanuts, and you go and find other stuff to eat instead.

    Really? Someone tell that to every tech company out there. With attitudes like that, Plasma TVs would have never been invented. Who was going to pay upwards of 15K for a TV, right?

    Bad analogy. As you well know, when those TVs were new, the manufacturers knew that only the well-off would be able to afford them at first, and as more folks bought them the price would come down, same as cell-phones, PCs, etc. With energy production, and especially something as huge as replacing or supplementing our demand for oil, the oil companies cannot put all their eggs into one energy basket and take the chance of trying to implement an entire new infrastructure only to see a promising new technology come along and waste billions of shareholder dollars. They need to be much more forward thinking than what the next gigahertz processor will look like or the next iteration of flat panel monitors.

  81. I’d like to know if any of these buffoons in congress are proposing to remimburse Exxon when they start showing a loss the next time. You know, like back when oil was dirt cheap, relatively speaking.

  82. ” Think of drilling for oil like being in a room full of shelled peanuts. At first it’s real easy to shell the peanuts and eat them, but as you discard the shells the peanuts get harder and harder to find. Soon enough it’s not worth the time and effort to find those last few peanuts, and you go and find other stuff to eat instead.”

    I don’t think anyone can prove we are in a situation with oil analagous to being down to a last few peanuts in a room.

    70% of the earth’s surface is covered by water and there could be vast quantities of oil in various places under the sea bed out there.

  83. I am a stockholder also of a few oil firms.
    Ive done well…for me the way I invest is whatever money i spend on fuel i also invest that much on oil stocks.
    Its worked out for me ok.
    But i have to agree that we should end all these dumb tax loopholes such as the subsidy for oil companies or the dumb mortgage interest deduction that home owners (like myself have).
    If we just could have a simple (or move towards) tax code that would make life easier (except for the accountants who survive with out chaotic system).

  84. I don’t think anyone can prove we are in a situation with oil analagous to being down to a last few peanuts in a room.

    Notice that I didn’t say we were. There might be a shitload of peanuts (oil) left. But with all the shells (politics, earth’s crust, enviro regs) in the way, they’re just more difficult to get to.

    And I haven’t read all the comments on here, but has anyone mentioned the lack of new refining capacity in the states? That might have something to do with it.

    Lastly, I too am a shareholder in XOM. But even if I wasn’t, I still would not want all the Chavez wannabees in congress dictating where all (or part) of the oil industry’s profits going. Do your jobs, dammit!

  85. “Notice that I didn’t say we were. There might be a shitload of peanuts (oil) left. But with all the shells (politics, earth’s crust, enviro regs) in the way, they’re just more difficult to get to.”

    I would say politics is the biggest impediment there is – and I put the enviro regs in that same category.

    Mismanagement of foreign government owned state oil companies like that moron Chavez in Venezuala is screwing up the efficient utilitazation of proven reserves.

    Continuing advances in technology do allow us to find and extract more oil than we could before however.

    Another factor that affects the price of oil and gas is speculation in the commodity futures market by hedge funds and other large institutional investors.

  86. 70% of the earth’s surface is covered by water and there could be vast quantities of oil in various places under the sea bed out there.

    Without oil being $500 a barrel, any oil company that did such a thing would be bankrupt, but not before the top executives are lynched by angry shareholders.

    You’d be better off cutting down trees to make gasoline (and there are cheaper alternatives than that).

  87. I’d like to add to this. I am a shareholder of XOM through an inheritance package, but Congress shouldn’t be giving tax breaks and subsidies to the oil companies b/c it is wrong. If we had a free market, none of this would be necessary, and I would buy up other businesses and be more comfortable in the diversification of energy. I am also a stock holder of some American alternative energy companies who are put at a disadvantage b/c they are not able to compete they do not receive such large subsidies, if any! I’d like to buy more, but the scales are tipped! The oil companies receive these subsidies from the gov’t so they can keep prices down! Anyone see anything wrong with this? Subsidies are not tax breaks they are your taxes and my taxes! You are paying taxes to keep the price of gasoline/diesel down, and now you are paying really high in gasoline to boot! This is not fair!

    Congress shouldn’t blame the oil companies for making more money. Congress should blame themselves for approving of subsidies, loans, and tax breaks for these companies and not for others. The American people should blame themselves for not pushing alternative energy sooner, and for resisting badly needed environmental and economic changes!

    In Europe everywhere you go you see biodiesel plants, solar power, sustainable nuclear plants, more public transportation and more communities centered around where people work, shop, go to school, and live. Here we have made no progress in any of those arenas!

    Here’s news: biodiesel is less expensive than petroleum diesel, and they don’t get subsidies! Only soybean farmers receive those, and many producers don’t use soybeans anymore! It is competitive on the marketplace, if it is released to the marketplace at all!

    The oil companies are taking advantage of every taxpayer and system right now, and profiting from it, making no effort to plan for the future, when there will come a day where no oil will be available, and the massive energy costs required to drill a hole in the ocean, ship the oil, and refine the oil only 20% yields gasoline and the rest plastics, kerosene, etc? That is not good economy. Ask yourselves how and why that is still less expensive than alternatives. It doesn’t add up.

  88. Further, Congress shouldn’t “ask” oil companies to give up subsidies. VOTE. They aren’t entitled to them legally. Vote to stop issuing them!

  89. “Congress shouldn’t be giving tax breaks and subsidies to the oil companies b/c it is wrong. ” You seem to be under the impression Congress gave some special tax breaks and subsidies to oil companies. This is incorrect. Congress passed a tax deduction available to ALL U.S. manufacturers, and now want to single out oil companies and make it unavailable to them.

    “I am also a stock holder of some American alternative energy companies who are put at a disadvantage b/c they are not able to compete they do not receive such large subsidies,” you have been misled; take a look at the books of those companies and compare their tax rates to that of the oil companies. By the way, are you aware that ethanol production actually IS subsidized by the government – farm subsidies. Are you aware how much of a “windfall” corn farmers have received from the move to that particular renewable?

  90. “Congress shouldn’t blame the oil companies for making more money. Congress should blame themselves for approving of subsidies, loans, and tax breaks for these companies and not for others.” I hope you now understand that the situation today is equitable: all companies treated the same. The House wants to change that: single out Oil Companies by making them ineligible for the deduction available to all others.

  91. “Without oil being $500 a barrel, any oil company that did such a thing would be bankrupt, but not before the top executives are lynched by angry shareholders”

    Really.

    I doubt that you know anything about the fesabilty of deep sea oil drilling.

  92. “Did I say anything about eliminating gas taxes?

    The point was to put the oil companies alleged ‘excessive’ profits that the blowhards in Congress are ranting about in perspective to the amount that consumers are paying to government in taxes.”

    No, you didn’t, but I couldn’t figure out why else you would have mentioned it. User fees don’t cover anywhere near the full costs of roads (see my next paragraph), so that relatively small amount that you pay in taxes is actually a tremendous bargain for what you’re getting. The problem isn’t what Americans pays for its roads – the problem is that the government DECIDED in the first place.

    “Have you got any proof that gas taxes only cover about 60% of road construction and maintainence?”

    At least in 1996 in California, that seems to be the number. And of course that’s the price the government paid – had an ordinary citizen without the power of eminent domain (and, more often, the implicit threat of it) tried to acquire all the land it takes to build this nation’s roads, it would likely have been much higher.

    http://moderntransit.org/letters/budget.html

    “Gas tax revenue has been siphoned off to pay for mass-transit boondogles…”

    The vast, vast majority (I’m talking upwards of 9 in 10) of all commutes in the US are made by private automobile transportation. While per-user spending and waste on public mass transit is likely higher, the shear overwhelming presence of the automobile is enough to make the miniscule amount spent on public mass transit look like peanuts. The market distortions created by the roads steamrollers over what puny effects isolated mass transit systems might have, which in any case have to work in areas with zoning laws limiting density (which is essential for profitable mass transit).

  93. …sorry, when I said “pay in taxes,” I meant that you pay in direct user fees (i.e., gas tax).

    And regarding my response to the second quote, I suppose you’re right in that costs would be lower than they are now because the private market would be more efficient, but I still think that the advantages that the government has with eminent domain outstrip their disadvantages when it comes to efficiency and corruption.

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