When politicians talk about taxing Big Oil or taking their record profits, they should think about who they would be hurting the most in this endeavor. Unfortunately, they like to demean oil and gas and paint a picture that is simply not accurate and therefore meant to mislead and anger the American public.
Take a look at what the oil companies do with the billions they take in each year:
• Currently, 9.2 million men and women are employed (directly and indirectly) by the oil companies.
• In 2010 they paid $86 million DAILY to the federal government for royalties, rents and bonus fees.
• They invested $266 billion in new capital projects in 2010. Which means lots of businesses benefited from these investments.
• In the same year oil companies paid $176 billion in wages to employees plus benefits and also made payments to oil and gas lease holders.
• Finally from net profits, they distributed $35 billion to American shareholders.
Who benefits from oil company profits? A 2011 Sonecon study found that state pension fund investments in oil and natural gas companies are providing strong returns for teachers, firefighters, police officers and other public pension retirees.
On average, oil and natural gas stocks comprise 4.6 percent of state pension fund assets, yet provide 15.7 percent of the returns, a ratio 3.4 to 1.
The U.S. oil and natural gas industry supports the retirements of tens of millions of Americans who have invested in industry stock.
In fact, if you have a mutual fund or IRA retirement account — and 95 million U.S. households do — there’s a good chance it invests in oil and natural gas. So when politicians scream about taxing oil profits more, what they are actually doing is taking more money from average Americans who count on those returns in their retirement plans.
There are a total of 17 major U.S. industries ranging from pharmaceuticals/medicines, computers & peripheral products, manufacturing, machinery, etc. In terms of net profits, the oil and gas industry ranks 11 out of 17 with a net profit of 6.7 percent.
Basically, they get to keep and distribute as shown above, 7 cents of every dollar they earn. And what does the government get?
The federal gas tax is 18 cents on the gallon, so for doing nothing to bring this product to market, the government more than doubles what the gas and oil companies earn as profit.
Just for balance, net profits for pharmaceuticals is 22.1 percent, computers is 21.8 percent, beverages and tobacco products 20.1 percent and the list decreases all the way down to gas and oil at 6.7 percent.
So maybe we should be asking why the Administration is so focused on this one particular industry.
Finally, the Administration is planning to allow the Bush tax cuts to expire at the end of this year and they are also pushing to increase the tax on dividends and capital gains from the current 15 percent to 20 percent in 2013.
So, on top of taxing the oil profits more and thereby reducing distribution to shareholders, the taxes on those dividends that they do receive will increase by 5 percent.
All of this data is readily available on the net with just a few searches and comes from both public and private sites.
Roger Casale
Peachtree City, Ga.
