Let's go over some of the eye-opening facts about our gas and oil industry:
- Oil Prices: The major oil companies do not set the price of oil. That price is set independently by traders based on world supply and demand, the strength of the dollar, stability in oil producing regions, and weather events, among other factors.
- Oil Usage - Transportation: Per the DOE, oil accounts for 94% of the energy used in our transportation sector.
- Oil As Our Single Largest Source Of Energy: Per the DOE, oil is our single most important source of energy, accounting for 35.6% of all energy consumed in America. In comparison, solar and wind, added together account for less than 1% of all energy consumed in the U.S. There is a reason for that. Wind and solar energy are vastly more inefficient and costly than oil, gas and coal. They are not commecially viable without substantial subsidies.
- Profit Margin: While oil companies' profits may be vast, that is because their volume is vast. America uses over 20 million barrels of oil daily. The actual profit margin across the oil industry averages less than 6 cents on the dollar. By comparison, Obama's favorite crony capitalist, GE, has a profit margin nearly 33% higher.
- Oil Companies & Taxes: The oil and gas industry is a cash cow for government. Oil and gas companies pay, on average, more than 40% of their profits in taxes. To put a number to this, over the past three years, the oil and gas industry has paid over $242 billion in taxes. Obama's favored business, GE, paid no taxes last year.
- Oil Companies & Jobs: Domestic gas and oil companies play a huge role in our private sector, supporting "9.2 million U.S. jobs and 7.7 percent of the U.S. economy."
- Reinvesting Profits: Exploring and exploiting new sources of oil is a time consuming and very expensive process. For instance, Exxon, in the first quarter of 2011, made an after tax profit of $10.65 billion. Of that, Exxon invested "$7.8 billion into capital and exploration."
- Our Trade Deficit & Foreign Oil: We are, today, transferring vast amounts of our wealth outside of the U.S. to purchase foreign oil. Approximately 62% of our monthly trade deficit comes from the purchase of foreign oil.
- Who Gets Rich Off Of Oil Company Profits: Profitable oil companies are a key portion of many pensions and portfolios.
[A]bout 1.5 percent of the shares of oil companies are held by the officers and board members of those companies. That is comparable to other industries. Similarly, if you look at who is holding the other 98.5 percent of the shares, more than 60 percent is being held by either mutual funds or the companies that manage large portfolios for pensions. There is another 9 percent that is held directly by pension plans and insurance companies and foundations.
. . . .
What do you say to people who are critical of oil and natural gas industry earnings? Aren't they really being critical of the benefits that are going to millions of American consumers and retirees?
Mr. Shapiro: Those earnings go to two places. They go to the dividends and the value of the stock that is held by pensions and people saving for their retirement. That comprises the overwhelming majority of the ownership of these companies. The other place where oil and natural gas company earnings go is into investment. The oil and natural gas industry has enormous investment needs. . . . That is the other place those earnings go. They go to the retirement plans of both average Americans and certainly the beneficiaries of the major pension plans in the country. They are public employees or auto workers and the earnings also go toward investments that generate returns in the future.
What all of these facts mean are that oil companies are huge industries that, in a myriad of ways, play a very critical role in supporting our economy. Moreover, nothing is going to replace our oil usage at any point in the forseeable future. Yet, with gas prices rising and the oil industry showing huge profits in the last quarter, the left wants to show they are doing something about gas prices - by punishing the oil industry. Specifically, Obama and Harry Reid propose removing "big oil's subsidies." And in reality, this is merely the latest in Obama and the left's much larger war on our domestic oil and gas industry.
George Will recently opined that the ideology and politics of the left are "untethered from the facts." Will, noting the left's substitution of wishful thinking for plans based in reality, chalks this up to deep historical ignorance. Will is half right. The other reason the left's politics and ideology are "untethered from the facts" is because the left are at least as intellectualy dishonest as they are historically ignorant. The actions of Obama, Reid and the left, to demonize and attack our oil and gas industry because gas prices are rising is merely the most recent proof.
The first deceit of the left is that the oil and gas industry receives no subsidies. Rather, what they receive, and that which Obama aspires to remove, are four tax write downs, three of which - domestic manufacturing tax deduction, percentage depletion allowance, and foreign tax credit - are available to every manufacturing entity in the U.S. The only way in which oil companies are treated partially different than other manufacturing entities in the the U.S. is as regards:
Intangible drilling costs -- According to CNN, "[a]ll industries get to write off the costs of doing business, but they must take it over the life of an investment. The oil industry gets to take the drilling credit in the first year."
So when Obama says he wants to take away all of "big oil's subsidies," what he is really saying is that he wants to single out our oil and gas industry for unfavorable tax treatment as compared to all other manufacturing concerns in America. He wants to treat them as a pariah and steal more of their profits.
It is hard to imagine a plan more "untethered from reality" or more cynically designed to gain political advantage, irrespective of the expense to our nation. Basic economics dictate that this plan will negatively impact our economy.
Singling out our domestic oil and gas for special, unfavorable treatment will reduce domestic oil production, it will increase our trade imbalance, it will cost us private sector jobs, it will harm the pensions of millions of Americans, and it will result in rising gas and oil prices to the consumer. Charles Krauthammer does a great job of skewering Obama and the left for the intellectual dishonesty inherent this ostentatious push to punish our oil and gas industry:
Ultimately, this proposal by Obama and the left is going nowhere, simply because there are too many Republicans in Congress to allow them to get away with this insanity. Were this the only attack on our oil and gas industry from Obama and the left, perhaps it would be no big deal. But the reality is that Obama is waging war on our oil and gas industry very effectively by other means.
While Obama recently claimed credit for increased oil production in America under his watch, that was the height of hypocrisy. To the extent that there has been a slight uptick in production under his watch, that is because of expansions of oil drilling on private lands in North Dakota, South Texas and West Texas. Further, these figures have been bumped upward by the opening of BP's deepwater Thunder Horse well. That well was leased under Reagan, the exploratory well dug under Clinton, the well set under Bush, and production only now coming to full flow. In sum, Obama had as much to do with the increase in domestic oil production on his watch as he has had to do with the daily rising and setting of the sun.
To the contrary, as stated earlier, Obama is warring quite effectively on our domestic oil drilling. He is doing so, on one hand, by severely restricting the availability of public lands and coastal regions for exploration and drilling and, on the other hand, by limiting permits for such activities:
In 2008 there were 2,416 new oil and natural gas leases issued on Bureau of Land Management (BLM) land spanning 2.6 million acres. In 2010, under the Obama Administration, the number of new leases issued dropped to 1,308 and acres leased dropped to 1.3 million. The total onshore acreage leased under the Obama Administration in 2009 and 2010 are the lowest in over two decades, stretching back to at least 1984.
There is also, of course, the permatorium on drilling in the Gulf, though at least a few drilling permits have recently been issued. The effects of Obama's war will be with us long after Obama himself is but a distant, very unpleasant memory in our national consciousness.
What makes this war on our domestic production, with all its attendant negatives for our economy, all the more mind boggling is that Obama has promised to significantly finance Brazil's development of their own oil industry. That is inexplicable - though of course it does bear noting that George Soros has a substantial investment, close to $1 billion, in Brazil's oil industry.
Fortunately for our nation, Obama's war on our domestic oil production is something that we can change at the ballot box. But there is also another front in the left's war on oil and gas - one that wholly bypasses Congress and the ballot box. I am referring to the radical environmentalists who have been given keys to the courthouse under our environmental laws. They are seeking new ways daily to bring our nation to its knees by hitting the off switch on oil, gas and economic growth.
One of their well honed methods is to request that a species be listed as endangered under the Endangered Species Act. Once whatever little beastie is then declared endangered, any and all human activity that effects that beasties's habitat becomes enjoined. So for example, California's Central Valley, which but three years ago was a thriving bed of agriculture, has seen its irrigation water shut and is today "Zimbabwe West." The reason - a law suit brought under the ESA to protect a 3 inch fish with no commercial value, the Delta smelt.
What the left accomplished in California with agriculture, they are attempting to repeat with the oil and gas industry in West Texas. The left has brought suit under the ESA to have the Dunes Sagebrush Lizard declared endangered. If they succeed, virtually all oil production and exploration in West Texas will come to a grinding hault.
And then there are the law suits charging that carbon dioxide is a pollutant for which emitters are liable. Their ultimate goal is to have the courts take over our nation's energy policy. Whether carbon dioxide is a pollutant and whether it is causing "global warming" are scientific questions very much at issue and that courts are unqualified to answer. Even assuming arguendo that CO2 is a pollutant causing global warming, what to do about it is a political question with massive ramifications for our economy. It is not a question to be decided by our Courts, but by our elected representatives.
Yet our federal judiciary, from the Supreme Court on down - none of whom are scientists - has shown an avid willingness to hear and decide such cases. The EPA is regulating carbon dioxide as a pollutant today under the Clean Air Act because five members of the Supreme Court felt qualified to pass judgment on this issue. Moreover, enterprising lawyers have brought suits against power companies under a nuisance theory because they are contributing to carbon dioxide in the air. These law suits are currently in the court system. If the lawyers succeed, the Courts then become the single most important arbiters of energy policy in America. On top of this, we have seen in the past week NASA's Jim Hansen, the "Bernie Madoff of climate science," file lawsuits with children as the plaintiffs seeking to have courts take complete control over our energy policy in the name of Global Warming.
While Obama's attempt to punish our domestic oil and gas industry for daring to make a profit is not going to go anywhere, his and the left's larger war on that industry is "untethered from the facts." We are all going to ultimately pay the price. I am praying that we are able to elect someone in 2012 who is both capable of articulating a coherent energy policy and who is able to take our courts and the radical left out of the business of deciding our nation's energy policy.
Linked: Larwyn's Linx