Got Gas?
Photo: news.nationalgeographic.com
I have been getting several responses to my previous blog on Exxon tax payments in which I said “we do not tax their absurd profits.” I was not being clear; I am not saying that Exxon doesn’t pay their taxes, just that their unreasonable profits aren’t taxed at a higher rate. Yes it is true that Exxon paid over $9 billion in taxes last year, but it was not to only the United States but also several foreign governments.
Based on what they paid in taxes their overall effective income tax rate is 46%. But keep in mind that this is to several governments, not just ours. So to say that they pay a higher tax rate than other corporations is false.
I know that there is a media bias towards bad news and I do not want to advance that agenda. My point with the blog was to try to come to an understanding as to why we pay over $4 a gallon for gas and how a company that sells the gas is making record profits.
Saudi Arabia has said, “There is no justification for the current rise in prices,” and Congress doesn’t seem to care. They shoot down a bill that would not only end tax breaks for oil companies, but also tax their windfall profits and make a way for energy price gouging a federal crime. (Why is energy price gouging not a federal crime by the way? We will talk about this on another day.) On the same day they shoot down a bill to provide companies who develop alternative energy tax credits.
The only tax breaks oil companies should be receiving are for research into alternative energy.
We are told that the high cost of gas at the pump is because of a supply and demand problem. If there is such a supply & demand problem with oil how can a company make a record profit? If oil costs more, wouldn’t their profits stay the same? Let’s look at a simple example:
Product A costs its maker $2, the company sells it for $4, making a $2 profit.
The materials for product A shoot up and it now costs $3 to make the product. The company now must sell it for $5 to maintain their current profit.
How can the company have record profits without raising their price? (Keep in mind that energy price gouging is not a federal crime…yet)
The company must raise it’s price to make ‘record profits’ such as Exxon has done. The company starts to sell product A for $10 citing a supply and demand problem. They are now making $5 profit per item.
The whole situation with oil in our country is complicated, gee I wonder why. If it were clear the people would demand that the people who they elect to represent them would do something about it.
I just wish we could put our energies into solutions instead of labeling people as left or right.
June 12th, 2008 at 6:40 pm
Let me see if I can shed some light as I understand it. I think your answer lies in the fact that the company does more than just “sell the gas.” They do have retail gas stations but that is not where the windfall lies. In fact they are currently seeking to exit the retail gas business altogether.
Exxon also explores for and pumps oil out of the ground to create crude oil. This costs them a certain amount per barrel regardless of the price of crude oil. Recently the price of crude oil which is traded on the open commodity market has skyrocketed.
Exxon did not raise this price, they just went along for the ride on the speculation caused by commodity brokers. This has resulted in a windfall or unexpected profit. Yes, they are indead making boatloads of money but I just don’t think it’s as devious as it’s being made out to be.
I see no need for government intervention here. I believe market forces will reach an equilibrium as some point and we’ll just have to get used to it…
July 16th, 2008 at 11:43 am
Ah, it all makes sense now. I heard from one of my university buddies that Miller actually works for the Sierra Club as a lobbyist. No wonder he has nothing good to say about politicians with conservative Christian values but has nothing but praise for Obama and Al Gore. So much for attacking all sides indeed…
July 21st, 2008 at 7:35 pm
Haha, I wish I were a lobbyist Todd (If you know of any openings let me know!) But thanks for keeping the debate up. I honestly wonder why if I ask why an oil company makes so much profit in the face of logic how that makes me a ‘lefty.’ Can’t I just be curious as to why the price of a good I use daily is skyrocketing? I’m probably one of the most center of the road (like most of Americans) guys you will read. It always takes an extreme winger to point fingers, when the truth is that the majority of people are in the center on most issues and they only get pushed left or right by extreme right or left wingers. It is sad, but someday it will change.
July 22nd, 2008 at 4:14 pm
Sorry to tie you to the left wing extremists at the Sierra Club if you aren’t with them. Not sure why someone would tell a story like that, it came on pretty good authority or so I thought.
I find it curious that a middle of the road guy like yourself would never have anthing good to say about a guy like McCain. It would seem like McCain and Lieberman would be your heros yet all the praise here is for Gore and Barack which doesn’t add up.
Anyhow, how about a new topic Miller…been a long time…
July 23rd, 2008 at 10:39 am
Who told you that anyways? haha, I just think it’s funny. By the way McCain circa 2000 would be my ‘hero,’ he was a true progressive and I did vote for him in that primary. However his views have changed completley since then. Which makes me wonder if he changed them so that he could win the nomination. Is it impossible for a progressive to win a nomination? New topics coming soon…
August 23rd, 2008 at 12:16 pm
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