People seem to have a negative demeanor when it comes to oil companies today due to the high price of oil. It's understandable to want to place blame, but this isn't the oil companies fault. I think people need to have a better sense of "don't bite the hand that feeds". If you start increasing taxes on oil companies, you're probably going to be effected.

Exxon is making record profits. I think of a lot of that has to do with dealing with a global product and having a US dollar in the dumps, but I'm digressing. Just look at how much tax Exxon pays.

This is an insane amount of money. To get a grasp of how much that is, think about this. Exxon pays more in taxes than the bottom 50% of American taxpayers. If you're looking for the data on that, you can check the 2004 IRS data(which was the last released) showing that 130 million Americans payed taxes and the bottom 65 million payed a grand total of $27 billion.

These ideas that oil companies "owe us" and that we should put a windfall tax on them is completely ludicrous. They do not owe us. They pay a very high tax rate when they could just easily move to Ireland or another tax haven country and not pay a cent to American government.

Think of this from an economic point of view. You're doing all the work and the government comes in and takes 41% of your total profit. It did absolutely zero work for it. What a slap in the face? Does this encourage oil companies to work harder? No!

Most people think that these rich oil guys get together and think up prices in a smoke filled board room. "Yes, let's gouge the Americans." Do most people understand how difficult it is to get oil? Do most people understand that there is a huge demand for oil with China and India entering the market?

I'm sure if you've been at a gas station, you should of noticed a sticker on the gas pumps. It shows a breakdown on gas prices. Profit makes up very little. Sorry, if Exxon gave back all it's profits, you might save 20 cents. The cost of producing crude oil, refining it into gas and taxes make up the biggest expenses. Here's the funny thing, the government is profiting from oil and gas at a faster rate than the oil companies.

Let me break it down point by point why gas is expensive:

  • The US dollar has taken a nose dive. It requires more dollars to buy the same amount of oil.
  • Prohibition of drilling oil in ANWR and the Gulf of Mexico that limit supply while demand has skyrocketed.
  • Instability in countries that contain oil. The Middle East is unstable, Africa is unstable and Venezuela. In fact, Chavez stole oil companies oil fields. There will be absolutely no foreign investment into the Venezuela oil fields because there is no concept of property rights.
  • Environmental regulations on the refining of oil to gas. In fact a new refinery hasn't been made in the last 30 years, yet the amount of gas consumed has gone up.
  • Environmental regulations have hindered other energy sources like nuclear and coal, leaving us mainly dependent on oil, which drives up the price.
  • Taxes on gasoline aren't flat, so as gases go up, you pay more taxes on it.
  • Excessive taxes on the oil companies themselves leaves them with less profit to reinvest in finding new oil to produce.
The process of producing oil isn't easy. Oil companies are some of the most regulated, the most pestered, the most that are limited with regulations and environmental laws that hinder them from producing enough oil to meet the demand of the world. We shouldn't want to tax oil companies or hate them. They produce a product that makes just about everything in the world go round and they charge less than a bottle of water for it. With the difficulties of drilling oil, with research, finding oil, drilling oil, distributing oil, refining oil, distribution of gas, franchising, taxes, regulations and doing this every single day of the year, I'm amazed. I thank you oil companies for doing such a great job.


Posted by Christopher | 9:27 AM | , | 0 comments »