What the oil execs told the House about $18b tax breaks and renewable energy
Let's say, just for fun, you made $123 billion in profits last year. Profits, not income. And you work in a country where money is stretched pretty tight (well, for most things, *cough* Iraq *cough*). Would you have the cajones to ask the citizens for another $18 billion? If you were an executive from one of the five biggest oil companies, you certainly would. Facing what CNNMoney called grilling and criticizing, executives from Exxon Mobil Corp., Shell Oil Company, BP America, Inc., Chevron, and ConocoPhillips sat before the House Select Committee on Energy Independence and Global Warming (chaired by Edward Markey (D-Mass., seen here in his Second Life incarnation) yesterday. While Democratic lawmakers took their shots at the oil companies for not investing more in renewable energy sources, a safe political move if there ever was one, the oil men just repeated frequent claims that whatever it looks like, they need the tax breaks. Exxon's senior vice president Stephen Simon told that he believes current renewable energy options can't meet America's energy needs and that Exxon is in the oil business and is content to leave renewables to other companies. Of course, Exxon is involved in some alternative power research, like a li-ion battery project, but not in any serious way. Other oil companies are looking a little beyond oil, too. Shell is looking for biofuel from algae, for example.
Democrats mostly wanted to cut the tax breaks, while Republicans, in general, supported big oil. CNNMoney quotes John Shadegg R-Arizona as saying, "I do not believe that funding renewable energy by taxing current forms of energy serves American customers very well."
[Source: CNNMoney]
Reader Comments (Page 1 of 1)
rtshinn 12:22PM (4/02/2008)
I wouldn't trust anything Big Oil is doing for alternative fuels. They need to insert themselves into the energy supply chain somehow, which means retaining the Internal Combustion Engine. ICE's require keeping the infrastructure in place that is currently owned by the oil companies.
The biggest threat to them will be Solar & Battery technology advances, with plug in hybrid then, eventually, pure electric cars.
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Chris 12:44PM (4/02/2008)
You have got to be kidding me! First of all, anyone from Congress grilling big oil on how they manage thier profits is the biggest csse of the pot calling the kettle black I've ever seen. Second, if big oil (ie-Exxon) doesn't want to invest in alternative energy, that's fine. Take that 18B in tax breaks from them and give it to companies who will.
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BlackbirdHighway 12:56PM (4/02/2008)
I pay Exxon enough money already at the pump. Why in hell do I need to pay Federal Income Tax, just so the US Governemnt can turn around and give that tax money to Exxon too? WTF?
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BlackbirdHighway 12:59PM (4/02/2008)
And why does congress need to waste time talking (or grilling, whatever) the oil executives.
Just make oil companies pay exactly the same tax rate as say, companies that make solar panels or windmills or electric cars. Why in the world is that not considered fair?
Right now, oil companies pay about 1/2 the tax rate of solar panel manufacturers.
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fnc 1:39PM (4/02/2008)
Billions of dollars in tax breaks for a company with record profits? That's redistribution of wealth if I ever saw it. Must be nice to be able to afford to own politicians.
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Golden Boy 1:43PM (4/02/2008)
There's a fundamental difference between a tax break and a redistribution of wealth. Does your mortgage deduction mean you're the equivalent of a welfare recipient?
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Lad 2:23PM (4/02/2008)
Well! Ain't this rich! Members of Congress who continue to accept oil campaign funding and favors from our U.S. oil cartel through the oil lobbying group, The American Petroleum Institute, are acually in agreement that these subsides should be eliminated. We'll see how serious they are in the next budget bill and we will record the names of those who vote for the subsides and let the world know who gives us chin music and those that really mean what they say.
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KarenRei 3:58PM (4/02/2008)
This whole event was just a "show trial" so that members of congress can be seen as actually doing something about a situation that they really don't have any control over, at least in the short term (less than a few years).
Anyways, my take on the subject is an approach that neither the Republicans nor the Democrats were taking. The Republicans think everything's just peachy with the way the oil companies are being run, and don't want anything to change. The Democrats would like to see them destroyed to make way for the new Green economy.
While I agree with the Dems goal, I think they're going about it all wrong. It's creating a huge wall of resistance and creating a fight where you don't need one. What industry, for example, would be more appropriate for offshore wind projects than one that routinely builds the world's largest structures offshore? What industry would be more appropriate for enhanced geothermal than one that routinely drills miles underground, fractures rock, and pumps fluids in and out? What industry would be more appropriate for developing new solar tech than one that employs many tens of thousands of chemical engineers? These are massive industries that have been optimized and optimized and optimized some more, to the point that they can suck up material trapped in rocks miles underground at the bottom of the ocean on the opposite side of the planet, ship it halfway around the world, put it through complex chemical processes, ship it again, distribute it to customers, and it's still comparable in price to milk. Why not take them along for the ride, let them apply that same optimization that's made oil so affordable that we can build our society atop it to cleantech?
My view is carrots and sticks. Take away subsidies for oil, throw in twice as much in subsidies for meeting the deliverables on renewables tech. Don't take an antagonistic approach to the companies themselves; let them continue to operate and profit, just like any other company -- however, at the same time, create an increasingly favorable environment for renewables and an increasingly hostile environment to oil, with the incentives and penalties of roughly equivalent financial magnitude to a company that would follow along, and both designed to ease the transition. Those companies who come along peacefully profit and change the world. Those who fight the changes perish and are gobbled up by those who came along peacefully.
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Wildgoosechase73 4:44PM (4/02/2008)
So the oil company made $123 billion, that means $61.5 billion went to the US government in corporate taxes. The other $61.5 billion went to dividends paid out to their stockholders who are largely the mutual funds that our 401k are invested in. Too bad it wasn't $500 billion!
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Kevin Nugent 8:04PM (4/02/2008)
hell no that sucks for you . Me relieving you of tax is only going to fill your pockets while dig a deeper whole in mine. Om top of that you are making 123 billion a year . How dare you ask for more.
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GenWaylaid 2:53AM (4/03/2008)
What's sad is that, if strategically invested in green technologies, that $18Bn a year could put the U.S. well on the road to solving its CO2 emissions problem in a decade (and, as a side effect, solving everyone else's CO2 emissions problems, too).
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Chris 7:57AM (4/03/2008)
PROFIT MARGIN NOT PROFIT you idiots.
Damn if the politicians didn't have a cherry picked audience just with the posters here. Profit is meaningless in this discussion, its profit margin that we care about.
Of that hundred billion in profit, go look up how much each paid in taxes and tell me who is making the real money. Go on... its out there but I know, your far too lazy to put forward the effort as most posters are... c'mon I dare ya'll.
The fact is, the profit they make is meaningless. The real profit mongers in this little story are the various levels of government who make no investment yet reap money for doing that nothing. What with losers like those screaming at the oil companies why should politicians change course...
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Mikeeeeeeee 8:36AM (4/03/2008)
Seems odd. I thought when the Liberals took over congress they were going to reduce prices. Since they took office gas has gone up atleast $2.00PG. Here they are again, more worthless investigations and pointing the finger at someone else. Oh well, just wait until the Libs get a President.
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dlm3 8:38AM (4/03/2008)
Here's a novel idea folks... So the Oil Industry gets an $18B tax break. Who do you suppose pays those taxes ? The investors in the oil companies ? Sure, in the form of taxes on their dividends, before the dividends are paid (and again after on their personal tax returns). Who else ? The employees and executives of the company ? Nah, they get paid what they get paid.
Hmm. Who pays those taxes then ?
Hint: LOOK IN THE MIRROR!
(a Tax, to a corporation, is an undeductible business expense. They pass along the cost of taxes as part of the cost of the gasoline you buy at the pump. Someone has to pay it, and a publicly-traded corporation is owned by its shareholders, not by an individual. From the shareholder's point of view, the tax is a cost against revenue, so it inevitably is figured into the price YOU pay at the pump. And so how is giving ourselves an $18B tax break is a bad idea again ??)
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Whopper 10:41AM (4/03/2008)
Karen is making real sense here. The basic infrastructure is in place within the big oil companies. They have the core competency but they have to change their mission statement to a more general term to include all energy forms and not just oil.
The Democrats are playing the "Don't tax you and don't tax me, let's tax the guy behind the tree" game. All taxes get passed to the consumer one way or another and governments squander that money and demand more.
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black gold 10:37AM (4/03/2008)
The alternate energy crowd reminds me of a pack of lemmings - willing to run off a cliff because that is what the lemmings in front are doing. We have apparently discovered a massive oil reserve in North Dakota that would allow us to get away from purchasing foreign oil. Will we take advantage of this gift or continue to shoot ourselves in the foot because it feels good?
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Mike 11:35AM (4/03/2008)
Will someone tell me why oil is subsidized in the first place? They can only charge what the market will support. Take that 18 billion per year and turn the marketplace upside down with a ton of EVs, diesels, and hybrids, as well as supporting the development of cellulosic ethanol and biodiesel, and hell, generally everything green. Yeah, the price of gas will go up for a few years. That's inevitable. However, afterward, our demand for oil will be less so the price will stabilize at a lower point. We have to consider this like putting money away for retirement-sure, some people may have to ditch the car and ride the bus, but in the long run it's still going to save our asses when everything else goes to hell.
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Noah 12:13PM (4/03/2008)
I could care less either way. The best way to help our energy problem is to take our own action, not rely on the action of others.
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BlackbirdHighway 1:59PM (4/03/2008)
@goldenboy #6 "There's a fundamental difference between a tax break and a redistribution of wealth. Does your mortgage deduction mean you're the equivalent of a welfare recipient?"
What exactly is this fundamental difference? If I make $100,000 and you make $100,000 and the gov't takes $30,000 from me in taxes, and takes $15,000 from you in taxes, then you have $15,000 extra, courtesy of the gov't. It is exactly like the gov't gave you $15,000. That is most certainly a redistribution of wealth.
And no, getting the mortgage deduction doesn't mean that you are a welfare recipient, but the effect is essentially the same; you have more cash to spend than someone who rents, courtesy of the government.
I used to be totally against the flat tax, but I have come to the point where I believe it is the only way to make it fair. By keeping a generous exemption, you can still have it progressive, but at least two people who make the same money pay the same tax. That's a lot more fair than our present system, where the tax you pay largely depends on how politically connected you are. Homeowners have political power, renters do not, so homeowners get a deduction and renters don't.
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Richard 10:06AM (4/04/2008)
Tax relief is generally given to encourage someone to make a decision that is actually sub-optimal for them, but beneficial for the taxing community.
Look at housing. It seems to have been well established that having a high percentage of resident homeowners strengthens a town, and eventually boosts its tax base. Same for the country, which is why people are incented to buy a home and live in it.
If a business is relocating and can - from their point of view - build their office in one of two towns, the towns will generally offer tax breaks in exchange for their business. They lose money directly doing this, but gain because without the tax breaks they wouldn't have the additional employment, services for the companies employees, et cetera, that all produce additional long term tax revenue.
Here's the problem. The oil companies are being offered $18b in tax incentives. What, exactly, are we as a country asking them to do that they would otherwise not be doing anyway?
Random factoid - the US consumes about 146 billion gallons of gasoline per year. US oil companies made about 84 cents of profit per gallon consumed. Interesting. Gas tax averages around 42 cents a gallon, but only 18 cents of that is federal (or about $26.3 billion). Most of the gas tax collected, therefore, will be used to offset the tax rebate offered to the oil companies.
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