Wednesday, June 11, 2008

Playing Politics With The Price Of Gas - A Sequel

PLAYING POLITICS WITH THE PRICE OF GAS - A Sequel

On yesterday, June 10, 2008, our Senators embarked on an effort to levy windfall taxes on the most profitable industry in US business history, the oil and gas industry. The bill which was sponsored by the Senate Majority Leader, Sen. Harry Reid (D. NV), proposed to impose a 25% windfall taxes on oil and gas companies. This bill is also heavily backed by Sen. Barack Obama, who on Monday called for a windfall taxes on oil companies. This would be in addition to the 35% taxes that these corporations already pay. Well, maybe the evil oil companies, and their overpaid executives deserve additional taxation. Please bear with me, as I may delve into a few more numbers here then I normally do. Now, let's examine the facts.

According to the California Energy Commission, the average price of gas in California on June 9th of this year was $4.43. Taxes, and the cost of crude, and refining accounted for 15.80% and 83.75% respective of the total retail price. The remaining 0.45% is comprised of Distribution and marketing costs, and profits. Now, I am by no means a business expert, but this has to be one of the worse business models that I have ever seen.

Upon studying the financial statements of ExxonMobil and Shell USA, I found that out of a combined income of US$35.9 Billion, they paid approximately $15.81 Billion dollars in taxes.
That amounts to approximately 44% of the gross income of these two corporations.

Again, one may say that it means less money for those gluttonous BIG Oil execs to get their baronial hands on. But what does it mean for us; the common man? Let's take the teachers in Texas. As of August 31, 2007, the Teacher Retirement System of Texas had a net worth of $111.1 Billion. Their investment fund experienced unprecedented one, three and five year returns of 14.4%, 12.8%, and 12.3% respectively. A little over 50% of their investments are in the domestic market. Their single largest investment is, yes, ExxonMobil. As of August 2007, Texas teachers owned approximately 18 Million ExxonMobil shares, valued at about $1.6 Billion.

I am sorry to be the bearer of bad news. But if you have a 401k plan, then you almost definitely own a part of BIG Oil. Sen. Reid, and his henchmen will not only be overtaxing the Oil Companies; they will be overtaxing you and I. With all of the taxes that the government has collected from BIG Oil over the last 25 years, we have yet to see what alternative energy sources they have successfully invested in. Yet they expect the oil companies to invest in alternative energies.

For those who do not have a 401k, and think that oil companies are evil, I will say to you what one of my compatriots said to someone else; "Buy the stock".
Welcome to capitalist America.

So, when the Senators, and Presidential candidate, call for windfall taxes, they are really only putting on a huge "dog and pony "show for their constituents, and voters, whom they hope to bamboozle. We should not forget that corporations are artificial beings, and as such, their over-sized tax burdens are actually defrayed by individual stakeholders. The more these corporations are taxed, the more we will see our retirement funds and dividends shrink. In addition to that, we know from history that when Jimmy Carter tried the windfall profits stunt, it actually led to less domestic capital investments. With an almost stagnant economy, the aforementioned combination of reduced corporate spending, and higher taxes will be the perfect storm for a recession.

I know that all of us, liberals, as well as conservatives, are interested in seeing the price of gas reduced. All of us have to take action, and we need to do so now. I am planning on sending a four-point petition to our Representatives, and Senators on the hill. The four points are as follows:

Allow domestic exploration, development and production
Abandon the idea of windfall taxes
Approve the construction of new refineries, and provide incentives to build them
Invest in nuclear energy

Please respond with a yes or no, if you want me to include you as a signatory to my petition. Please forward this email to as many people as possible, and ask them to email me (boom.m.wilson@gmail.com) with their name, city and state.

Despite our differences, we need to work together on this issue, and we have to send a message to the politicians in Washington. We do not need them grandstanding, while we toil with the ridiculous price of gas.

I look forward to hearing from you.

Disclosure/Disclaimer: I am an employee, and a shareholder of ExxonMobil Corporation. However, I am not a spokesperson for my employer. The views contained herein are mine, and they do not (or may not) reflect the views of my employer.


Sources:
www.exxonmobil.com
http://www.trs.state.tx.us
http://www.shell.com
http://www.energy.ca.gov
www.senate.gov
http://thomas.loc.gov/cgi-bin/bdquery/D?d110:13:./temp/~bdhOuI::

1 comment:

Anonymous said...

Well said.