Oil Subsidies

[RickN]

I thought a little truth about the so called Oil Subsidies was in order.

About Those Oil Subsidies
By Randall Hoven
Everyone wants to end subsidies to oil companies, from President Obama to John Boehner and Paul Ryan. My question was "What subsidies?" Remarkably enough, CNN Money provided the answer.

It turns out that they are all tax "breaks." I even hesitate to call them "breaks" because some of them amount to little more than Congress defining accounting terms such as "capital equipment." And the total amount of earnings not collected in taxes (which liberals define as a "subsidy") is about $4 billion per year. Here is how that breaks down.

Domestic manufacturing tax deduction -- $1.7 B. This is a tax deduction given to every manufacturer in the US. Per CNN, it was "designed to keep factories in the United States." If that deduction were eliminated for oil companies only, it would mean singling out oil companies from all other manufacturers.

Percentage depletion allowance -- $1 B. Any industry can write down a portion of the cost of its capital equipment as part of the cost of doing business. Right now, oil in the ground is treated as capital equipment. Again, this "subsidy" amounts to how the cost of doing business is defined. All companies get it, not just oil companies.

Foreign tax credit -- $850 million. Companies get credit for taxes they pay to other countries. All companies get this "subsidy," not just oil companies. Should a company pay tax on tax? Should only oil companies pay tax on tax?

Intangible drilling costs -- $780 million. 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." Among these four tax "breaks," this smallest one was the only one that treated oil companies differently.

The above tax "breaks" explain how much tax revenue is not collected from all oil companies. How much is collected?

Exxon recently released its first quarter results for 2011. The number grabbing the headlines was Exxon's profit: $10.65 billion in a single quarter. The number not given quite as much exposure was the taxes it paid in that same quarter: $8 billion, or 42% of income before taxes.

And what does Exxon do with all that money it has left after paying $8 B in taxes? It put $7.8 billion into capital and exploration, as part of its plans "to invest between $33 billion and $37 billion per year over the next five years to develop new energy supplies."

In any other industry, that would be called "research and development." Exxon is plowing 73% of its after-tax profits back into R&D. Who would be better at spending $4 billion of energy companies' earnings in an attempt to provide our energy in the future: the energy companies or Obama's energy czar?

Do you know what oil company does get US subsidies, and not just tax "breaks"? Petrobras, Brazil's state-owned oil company. According to the Wall Street Journal,

The U.S. is going to lend billions of dollars to Brazil's state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil's Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil's planning minister confirmed that White House National Security Adviser James Jones met this month [August 2009] with Brazilian officials to talk about the loan.


Just to re-cap a few pertinent features of these "subsidies" to oil companies that Obama wants to cut.

* They are all tax "breaks," or earnings that oil companies get to keep, not money paid out from the US Treasury.
* The amount of earnings not collected in taxes is about $4.3 billion per year -- about 0.2% of this year's deficit and enough to fund about 10 hours of current US government spending.
* A full $3.55 billion of that amount (82%) is due to the way taxes are treated for all industries or manufacturers. To change these tax laws only for oil companies would require singling them out among all industries for special mistreatment. (I'm not a lawyer, but that sounds like a bill of attainder to me, something our Constitution forbids.)
* The only tax in which the oil industry seems to get special treatment compared to other industries is intangible drilling costs. The amount of that subsidy? That would be $0.78 billion per year -- enough to fund less than two hours of federal spending in 2011, and not even half the amount we are lending a foreign-owned and state-owned oil company for drilling offshore Brazil.
* Oil companies already pay tax rates of 40-50% of income. For one company, Exxon, in one quarter of one year, that amount was over $8 billion, or almost double the so-called tax "subsidy" for all oil companies for an entire year.


If you think oil companies enjoy some special privilege because of the money they throw around Washington, DC, consider that the Oil & Gas industry ranked only 19th in the amount of money contributed to politicians in the 2008 election cycle: $17.7 million. Who was number one? Lawyers, who contributed $126.9 million, or over seven times as much as the Oil & Gas industry. The Education lobby gave $37.4 million, more than twice as much as Oil & Gas.

You might not realize it, but private oil companies don't own much oil. Most oil in the ground, in fact 87% of the world's supply, is owned by state-owned companies, and most of that by OPEC countries and Russia. Exxon, for example, owns only 0.68% of worldwide oil reserves. Venezuela owns 7.34%, more than 10 times as much as Exxon. What Exxon does is explore, drill, transport, refine, and distribute. It makes its money by doing things, not by sitting on capital.

According to the DOE's Energy Information Administration, every time you fill up your gas tank, more of your money goes to taxes than goes to refining costs and profits combined.

Having said all that, go ahead and get rid of that special treatment of intangible drilling costs. Make oil companies write them down over the life of their investments, not just one year. Increase corporate taxes in the US, where corporate tax rates are already highest in the world. Collect enough money to fund the federal government for two hours.

And of course, tell your constituents you don't kowtow to those big, bad oil companies. Unless they're owned by Brazil.

I will see if I can find something on subsidies given to "green energy"

 

[RickN]

First one,

Section 1603 of the 2009 stimulus bill instructs the Treasury secretary to issue grants to companies that develop renewable energy installations. To date, the Treasury Department has given out $6.9 billion in these grants (which cover 30 percent of all cost), with more than 80 percent of that money going to wind farms.

First, consider Obama's talk of "tax reform" and curbing "spending in the tax code." The 1603 program has already spent more than twice the $3.4 billion originally budgeted for it. Given the slew of other subsidies for renewable energy (federal loan guarantees, renewable energy standards, local and state handouts, and much more), this program would seem a great place to begin cutting spending.

Read more at the Washington Examiner: http://washingtonexaminer.com/polit...tax-code-subsidies-green-energy#ixzz1WgJLlHK6

 

[tRidiot]

I will see if I can find something on subsidies given to "green energy"

OMG... I'm gonna bet there's PLENTY of that going around... don't forget corn/ethanol subsidies in there.

 

[RickN]

Next one, kind of makes the $4 billion in tax breaks the oil companies get look tiny especially since those tax breaks are available for all companies.

The federal government handed out $37.2 billion in direct energy subsidies in 2010,

http://www.forbes.com/sites/realspin/2011/08/15/where-federal-energy-subsidies-really-go/

Here are tax credits,

White House Awards $2.3 Billion in Tax Credits for Clean Energy Developers

http://green.blogs.nytimes.com/2010...n-in-tax-credits-for-clean-energy-developers/

 

[Hobbes]

I thoroughly debunked the OP with a brilliant response that was totally beyond question.

Unfortunately, it was lost along with some others during the transition to the new website and I'm too tired to write it up again.

Rick will just have to take my word for it.

 

[Rajder]

I thoroughly debunked the OP with a brilliant response that was totally beyond question.

Unfortunately, it was lost along with some others during the transition to the new website and I'm too tired to write it up again.

Rick will just have to take my word for it.

I was wondering why make post went away. I posted somthing to the fact that the statement that the US gov't is loaning Petrobas money as being false. And I wouldn't trust anything written by an author who is willing to bend the truth to meet his own persoanl bias. But I'm not going to the effort to retype the whole thing. So ya'll will just have trust me as well.

 

[EFsDad]

Here is half a billion... that "We the people" got shafted on...


http://www.tulsaworld.com/business/article.aspx?subjectid=49&articleid=20110901_222_E1_CUTLIN589741

Solar firm with Kaiser ties shuts down

By JOE STEPHENS & CAROL D. LEONNIG The Washington Post
Published: 9/1/2011 2:35 AM
Last Modified: 9/1/2011 4:51 AM

A company that served as a showcase for the Obama administration's effort to create jobs in clean technology shut down Wednesday, leaving 1,100 people out of work and taxpayers obligated for $535 million in federal loans.


Solyndra LLC, a Fremont, Calif.-based solar panel maker, was partially funded by Tulsan George Kaiser. It had long been an administration favorite. Over the past two years, President Barack Obama and Energy Secretary Steven Chu each had made congratulatory visits to the company's headquarters.

Although Wednesday's announcement came as a surprise, House Republicans and government auditors had questioned the wisdom of the administration's loan guarantees to the company, backed in part by capital from a group controlled by Kaiser, a billionaire Tulsa oilman, banker and Democratic fundraiser.

Solyndra had raised nearly $1 billion in private equity financing. The largest investor, according to a report by CNN Money, was the George Kaiser Family Foundation.

The foundation was listed as holding more than a 35 percent equity stake when Solyndra filed for a $300 million initial public offering in 2009, CNN Money reported. The solar company later canceled the IPO.

Other big backers included Madrone Partners, a venture capital firm affiliated with the Walton family of Wal-Mart Stores Inc., with an 11 percent stake, and U.S. Venture Partners at 10.19 percent, CNN Money reported.

Officials with the George Kaiser Family Foundation did not return phone calls late Wednesday.

In July, a House subcommittee subpoenaed White House documents related to the guarantee, and after Wednesday's developments, Republican lawmakers vowed to continue investigating.

Solyndra officials said they were suspending operations and planned to seek Chapter 11 bankruptcy protection. The move would give the company time to evaluate options, including selling the business or licensing its technology to other companies.

"This was an unexpected outcome and is most unfortunate," Solyndra CEO Brian Harrison said in a statement. "Regulatory and policy uncertainties" made it impossible to raise capital to quickly rescue the operation, he said.

The White House said it remained committed to clean technology.

"While we are disappointed by this particular outcome, we continue to believe the clean energy jobs race is one that America can, must and will win," it said in a statement. "The Department of Energy's overall portfolio of investments - which includes dozens of other companies - continues to perform well and is on pace to create thousands of jobs."

Wednesday's announcement came amid a broader shakeout in the solar industry. Energy Department officials said that cheaper solar panels made in China undercut Solyndra.

"We have always recognized that not every one of the innovative companies supported by our loans and loan guarantees would succeed," Energy Department spokesman Dan Leistikow said in a statement. "But we can't stop investing in game-changing technologies that are key to America's leadership in the global economy."

The Treasury Department provided Solyndra's loan, on the assurance of the Energy Department. The terms were reviewed in advance by the White House Office of Management and Budget, and almost all of the $535 million has been disbursed to Solyndra.


Original Print Headline: Solar firm with Kaiser stake folds

 

[Biggsly]

Here is half a billion... that "We the people" got shafted on...


http://www.tulsaworld.com/business/article.aspx?subjectid=49&articleid=20110901_222_E1_CUTLIN589741

You just wait. Obama has a NEW jobs plan that is going to save us all. Something tells me that a few things most of America does not want, will be slipped in, but thats the Obama way.......lol

 

[_CY_]

and what's the source of this little nugget.. Fox news?

What a big pile of steaming horse manure!!!!!

facts are after Katrina, which was used as an excuse to justify almost tripling of fuel costs within USA literally overnight . which then was followed by HUGE increases of fuel prices all over the world.

this resulted in a winfall measured in Trillions $$$$ or the largest transfer of wealth in the history of the world. what's is amazing is how above FACT is glossed over by the media. folks this is pass tense, we all know the above happened. NO amount of spin will change above FACTS.

how oil companies were able to pull this off was due to shear size. when MEGA giant oil companies was allowed to merge creating multinationals with budgets size of small countries. they control HUGE geographic regions. NO price fixing needed... Oil companies can change prices at will... supply and demand and cost of delivering product has had NO relevance to final fuel prices for the last several years.

High fuel prices is more than a direct cause of the world recession. High fuel prices is the PRIMARY cause. It's simply not possible not to have a negative effect after extracting $$$ trillions dollars out of the world's economy in such a short time frame.

Don't believe me?? ...simply follow what happened to the US economy after any lowering of fuel prices. when fuel prices came down after almost crash of 2008. the US economy made a small rebound. it's estimated by economist that fuel prices lowered had a direct impact on US economy 20x-30x the amount of the stimulus package.

our current double dip can be directly traced to raising back up of fuel prices!

Katrine landed August 2005. The world has been saddled with tripling of fuel prices ever since. overnight the already super profitable Oil companies' net profit JUMPED by 30x +... these are the same folks still getting $$$ billions from you and me the tax payer.

everything above is pass tense and can be easily verified. Nothing complicated here... same costs of delivering product + tripling of prices charged = 30x net profits increases x volume in $$ trillions = the most profitable companies on the face of the earth.

I thought a little truth about the so called Oil Subsidies was in order.



I will see if I can find something on subsidies given to "green energy"

 

[Biggsly]

Obama will fix it. He just needs four more years.