Big Oil Reacts to Obama's 'Discriminatory' Proposals

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Offshore oil rigThe petroleum industry is pushing back against President Obama's demand, brought up during this week's State of the Union address, that tax subsidies for oil and gas drilling be curtailed.

"It's not as if the government is taking money out of its pocket and paying the oil and gas industry," says Stephen Comstock, manger for tax policy at the Washington, D.C.-based American Petroleum Institute. "The fact is we're in a net income tax system, and in many instances these are recovering our costs. To sit there and say they are OK for everybody else, but they are not OK for you seems discriminatory."

In his speech Tuesday, President Obama called for increased subsidies for renewable energy sources like biomass and wind power. But he went one step further and called or eliminating existing subsidies for the oil industry.

"I don't know if you have noticed, but they're doing just fine on their own," Obama told Congress, which must approve any reduction in oil industry subsidies. "So instead of subsidizing yesterday's energy, let's invest in tomorrow's."

Intangible Drilling Costs


Obama didn't specify exactly which subsidies he'd like to eliminate. The API issued a fact sheet that quoted a government study estimating that the oil industry received $2.15 billion in subsidies and support.

This is mostly for so-called intangible drilling costs, mainly the costs of labor for drilling a new well, which Comstock says is similar to deductions for research and development enjoyed by most big companies such as drug firms. The other tax benefit is the oil depletion allowance, which allows a deduction from gross profits for depleting exhaustible resources.

Another tax benefit the oil industry receives is manufacturing assistance for their operations. Most manufacturers receive a 9% deduction for that expense, but oil and gas companies are capped at 6% and could conceivably lose it all together.

50,000 Jobs Lost?


"Unfounded assertions that the oil industry receives special tax treatment accomplish nothing -- except to threaten the industry's ability to contribute to the nation's economic recovery," Ken Cohen, vice president for policy and government affairs at ExxonMobil (XOM), the nation's largest oil firm, wrote on his blog.

Comstock says the API prepared an assessment of what the impact would be if the government imposed $5 billion of new taxes on drillers. It estimated that such a move would cause 50,000 jobs to be lost by 2014 and reduce production by 700,000 barrels of oil equivalent a day.

"It breeds on itself because that generates less income for the companies, which then leads to reductions in their drilling budgets, and it has a cascading effect," he says.

Drilling has been curtailed by the moratorium in the Gulf of Mexico, but new wells are still being drilled in the Marcellus area of Pennsylvania, which provides natural gas along the East Coast, and the Bakken field in North Dakota.

Obama's comments didn't seem to adversely affect oil stocks: The oil index ($XOI) is up 5.21% so far this year, including a 0.05% bump Thursday.


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Dereck

Major Fraud Alert


The entire Federal Banking System under FirstGov has been "Consumed" and "Levied" by way of a Maryland State Circuit/District Court Ruled “Appropriation and Garnishment” of all Future Earnings prior to and after 2004 against Bank Of America by way of the F.D.I.C. Regulations Prohibiting failing Banks from Merging with other failing Banks between the Dates of 08/04/08 and 10/09/09.

Bank of America violated the 21st Century Act: Final Amendments to Regulation CC Section: http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040726/attachment.pdf

seeking reimbursement of Credit, Loan, and Finance Balances as a "Bank Entity" and not a "Nonbank Consumer" as specified on Pages 85 and 86.

The person they sued through a LLC. Debt Collection Company and Law Firm was the "World Fortune Owner" who "Counterclaimed" and won.

Now all Contracts of any Corporations (Including Employment) under the "Controlling Interest" of any Investment Bank Worldwide are "Null and Void", and are also under the stipulated Rules and Regulations of an "Closely-held S Corporation rendering all Employed under Legal Actions against “Domination”, and also means that "No Corporation can hold Shares" officially making every Stock Exchange on the Planet a "Ponzi Scheme" by default.

Businesses owned by the States (Public Corporations) are being sold Stock Shares by Corporations also under the Federal Banking System in this Worldwide "Ponzi Scheme". The World Fortune Company Merrick Inc. Sweden is dissolving Millions and Billions of Dollars from "All Levels of Government"in the U.S. of Financing based upon Years of "negligent inaction" involving this case.

The Federal Government has already been forced to discontinue supplying the Financing States use to pay their debts, Persons in Government Offices may want to begin to take their jobs more seriously, these are different times from 10 Years ago and you will not be accepted civil servants here just because you say you are here to do the right thing.

May 29 2011 at 1:43 AM Report abuse rate up rate down Reply
David

"Country of Origin Labeling" would compel OPEC nations to compete for US Market share.

How could America's free market system break the monopoly of OPEC on our great nation?

Simple: require "country of origin labeling" (COOL) on each barrel of imported oil into the USA indicating the nation where the crude emerged from the ground. This import requirement would effectively differentiate crude oil sources among OPEC nations to enable American consumers at oil pumps to choose which nations' oil to pump into their cars and home for fuel.

If US consumers could clearly discern the origins of their oil, then they would choose to buy more oil from our nation's allies like, for example, Canada, Norway or China and less from OPEC states like Venezuela, Libya or Iran.

The American market could better and more clearly differentiate among our friends and enemies to spend their billions accordingly and it would impact the behavior of individual OPEC nations competing for more American market share.

We already know the "free market" affect of country of origin labeling and have a working model in place for it: the US Department of Agriculture has mandated "country of origin labeling" to arm American consumers with knowledge as to where all imported meats, fish and shellfish originate.

This USDA model initiative became welcome news in places like Louisiana where Chinese importers of cheaper, frozen crawfish had been masquerading as purely Cajun.

Under the new USDA COOL legislation, designed to ensure fair competition to consumers of Louisiana crawfish, Chinese crawfish now must be clearly labeled as “Made in China.”

American consumers often prefer to know the geographic specifics as to where their products originate, especially when they sense that imported products represent a meaningful difference in quality, price or value and when a commodity may not be produced domestically.

Take coffee, for instance: when one enters a Starbucks for a cup of Java, a choice exists of coffees grown around the world.

Sophisticated coffee drinkers may well seek to know the national origin of the coffee on the farm where the beans were picked. Coffee sellers like Starbucks are pleased to breed brand loyalty by proactively informing their customers with clear, honest, voluntary labeling as to the national source of their beans.

The same is true in the sale of bottled drinking water. Many consumers are rightly concerned about the purity of the source of the spring waters upon which they depend to hydrate their bodies.

Poland Spring markets its source in the woods of Maine as a unique selling proposition. Who would be more inclined to drink water from an impure or polluted source when it was known to be readily available from a naturally pure source?

While the commodities of crawfish, coffee and bottled drinking water are widely sold based upon their COOL, the source where crude oil flows from its well is far less considered by Americans in the purchase of home heating oil and gasoline.

All crude oil is not the same: like coffee, crawfish and drinking water, its national source of origin may represent a meaningful difference in the buying decisions of consumers.

As America strides deliberately toward energy independence, Crude COOL represents an opportune, new strategy for the interim to improve how we buy fossil fuels for our cars and homes based upon better labeling to disclose the national source of the crude oil.

The Crude COOL Strategy is based upon the proven idea that if American oil consumers, like devotees of real Cajun crawfish, Starbucks coffee and Poland Spring Water, understood the national origins of their gasoline and home heating oil, then they could make more personally satisfying decisions about which brands to buy.

Their preferences could be shaped by their sentiments about the country from which the crude oil originated. Americans could then distinguish among world brands and gravitate toward those countries of origin that they favor.

For example, as many consumers know, the CITGO brand is run by the national oil company of Venezuela, which is the second largest exporter of crude oil in sending 1.2 million barrels per day in July to the USA, behind only Canada (1.746 million barrels per day). Chavez has made a comfortable political career vilifying the USA and then taking our petro-dollars to his Treasury in Caracas by the billions.

So why buy the gasoline of an enemy for your car or oil for heating your home when you could buy a friend’s?

Read more at my blog at: http://hubpages.com/hub/Break-up-OPEC-with-Country-of-Origin-Labeling-COOL-on-Crude-Oil

February 01 2011 at 2:42 PM Report abuse +1 rate up rate down Reply
2 replies to David's comment
drdave415

sounds good, but dont they mix it all up at the refinery?

February 01 2011 at 5:24 PM Report abuse +1 rate up rate down Reply
Heather Morris

David,
The link to your blog is no longer active. I'm interested in reading more, can you tell me how to do that?

December 02 2012 at 8:33 PM Report abuse rate up rate down Reply
David

Big Oil has bought and sold Congress many times over.

February 01 2011 at 2:35 PM Report abuse +2 rate up rate down Reply
yak2664

Good grief Charlie Brown. Oil is already on it's way to $200 a barrel regardless of subsides or not. The question should be asking is do we as taxpayers want to keep subsidizing this finite industry? Oil will run out. China, India, Brazil and other developing nations will demand more of what is produced, raising prices for all. OPEC will continue to control supply. The markets will continue to react to every uprising and demonstration in a Middle Eastern country. The American government's tax breaks to these companies ultimately will mean little to the price of oil. It is already out of our control, oil industry shill pleadings and insults not withstanding. Government incentives would be more wisely spent on natural gas production, coal and in encouraging alternative fuels, with the caveat that any company receiving American tax dollars sells what it produces in the United States. Drill for what we have (PS, the Bakken Shale is not a panacea for our oil woes, only a band-aid due to the lower percentage of recoverable oil), but make the companies who are making the profits bear the costs, not taxpayers.

February 01 2011 at 2:01 PM Report abuse +2 rate up rate down Reply
bbblehead

I hope you big oil money grubbing POS die a slow painful death. You're all a bunch of scabs. Make a profit. Make a GOOD profit but enough is never enough for you scumbags. You're hurting every working class blue collar family out there and you know it but don't care. I hope in the great scheme of things Karma makes everyone of you money grubbing B______ds and YOUR families pay for it and pay for it dearly.

February 01 2011 at 12:56 PM Report abuse +1 rate up rate down Reply
jonathan

So let me get this right. Oil companies are seeing huge profits and yet the government is giving the billion of dollars per year. Where does the government get its money from. Looks like big oil may be double dipping. They get to money from our pockets at the pump and then through our tax money. I own a small business and the government (federal or local) does not subsidize my business. But I do not show billions in profit either. I guess the more you make the more the government will help. Sounds backward to me.

February 01 2011 at 11:08 AM Report abuse +2 rate up rate down Reply
1 reply to jonathan's comment
tags1960

The government doesn't subidize your business but you get deductions for expenses right? The oil companies can't write off everything like you can, only a percentage of some expenses. The oil companies also pay a load in taxes each quarter. Exxon Mobil pays $25-$29 million a quarter here in the US alone and billions worldwide.
Take away the subsidies and what happens to the price of gas? It goes up. You want to pay more at the pump just so you can feel like the oil companies are getting whats comming to them?
Instead of looking at how much big oil makes take a look at their profit margin, usually 6.5% - 8.0% and what their effective tax rate world wide is, around 47-49%.
Obama doesn't care about how much we pay at the pump, if he did he would lift the ban on drilling off shore here. Remember when gas went up under Bush and everyone blamed Bush? Well because of Obama's ban the price of oil has gone up so why isn't there just as much outrage about Obama when Bush really had nothing to do with the increases under his watch (China increase use by 33% in YoY causing that spike).

February 01 2011 at 12:18 PM Report abuse -2 rate up rate down Reply
jonathan

So let me get this right. Oil companies are seeing huge profits and yet the government is giving the billion of dollars per year. Where does the government get its money from. Looks like big oil may be double dipping. They get to money from our pockets at the pump and then through our tax money. I own a small business and the government (federal or local) does not subsidize my business. But I do not show billions in profit either. I guess the more you make the more the government will help. Sounds backward to me.

February 01 2011 at 11:08 AM Report abuse +2 rate up rate down Reply
hank870

We have plenty of oil in the ground, probably more than in the Middle East but some idiots do not want our country to have it, but those same idiots do not mind India, China and others having it. Go Figure.

February 01 2011 at 10:04 AM Report abuse -3 rate up rate down Reply
2 replies to hank870's comment
tags1960

The Bakken Fields have more oil that the Saudi's largest oil field yet we are limited here in how many wells we can drill to tap into that field.

February 01 2011 at 12:19 PM Report abuse -2 rate up rate down Reply
cazsue

There are the Christ-like people who want to preserve the earth for future generations, but that would be treating others as we want to be, and selfish greedy people don't want that!

February 01 2011 at 2:30 PM Report abuse +2 rate up rate down Reply
chrsclem4

Okay we pay subsidies to oil companies to drill new oil platforms, why? I'm not real clear on why the U.S. pays subsidies to oil companies when it is their business to drill & produce oil. In my business I don't get subsidized for trying a new product. Corporations keeping getting larger while the small oil companies get shutdown. A crying shame.

February 01 2011 at 9:19 AM Report abuse +2 rate up rate down Reply
1 reply to chrsclem4's comment
shawnnoonan

This is the whole problem. The oil companies don't receive subsidies - they have the same right that other companies have to offset their expenses against their income. If they take that right out of the tax code then they should do it across the board - not just for oil companies. If you want to find a true subsidy look no farther than ethanol, wind and solar. These producers receive huge tax credits for their investments PLUS the capital cost recovery that all other businesses get. It drives me insane how Obama keeps saying the oil companies receive subsidies but never a word of truth about the true subsidized industries - the ones that can't compete in the energy world without tons of our tax money. BY the way - the wind and solar credit has been in the tax code since the 70's. Isn't it high time they were weaned off the govt dole?

February 01 2011 at 11:04 PM Report abuse rate up rate down Reply
muenft

When Katrina tore up mississippi and they turned the electricity off we were unable to buy gas because it takes electricity to pump it. We drove 95 miles one way for a tank of gas and to fill our little red gas cans. No one gave a hoot what it cost, they had to have it to get to work,
When obama is cutting off the production of oil it is the same thing..continued demand but increase p[rices. this time it is unnecessary..man made problem..and OBAMA IS THE PROBLEM. If you don;t like big oil, park your car, carry your groceries in a wagon, walk to work..i will wave at you as i drive by. idiot

February 01 2011 at 1:39 AM Report abuse rate up rate down Reply
2 replies to muenft's comment
tags1960

At least someone else gets it

February 01 2011 at 12:20 PM Report abuse -2 rate up rate down Reply
cdcollectoropb

Your the Idiot.Katrina turn off the electricity.Now ! for the Big Profit,The fact that there is no control on the prices at the pump, so guess what, you got F#*Ked over.That has not one thing to do with Obama.Don't forget Bush came from Big Oil you Idiot.Big Oil has most of the Rep.in there back pocket's and guess what, they could care less about this Country or you.It's all about " I,Me,Mine" Take the money and run!!Wake UP !!

February 01 2011 at 6:44 PM Report abuse rate up rate down Reply