#BigOil: The #Obama Boogeyman and Tax Policy

The Administration and many Congressional Democrats are after Big Oil again. In fact, BIG OIL has become Obama’s boogeyman. He raises the subject to divert attention from the failures of his Administration and to create an evil and scary foe for us all. He has to blame some one when things go awry. Four dollar gasoline, it cannot possibly be the fault of his policies.

Yesterday, the U.S. Senate, by a vote of 51-47, failed to invoke cloture on a bill to radically change the tax treatment on certain oil and gas producers. The additional revenues would have been used to fund expired and expiring tax subsidies for renewable and alternative energy sources.

At nearly the same time of the vote, President Obama was presenting his own views, urging Congress to eliminate what he calls favorable, greedy tax treatment for the industry by railing against oil company profits, and petroleum market speculation, although the White House has already conceded there is no direct and immediate linkage between ending oil company taxes and reducing gasoline prices.

“When the price of oil goes up, prices at the pump go up, and so do these companies’ profits,” Obama said. “ Meanwhile, these companies pay a lower tax rate than most other companies on their investments, partly because we’re giving them billions in tax giveaways every year.”

This is where it gets confusing and hypocritical. I think Apple is making too much money. Goggle and Microsoft also. They could sell their stuff for lower prices. These tech companies have much higher gross margins than the oil and gas industry. Let’s blame them for being greedy. In addition, Mr. Obama’s comments state very clearly that he thinks all money, all wealth belongs to the government and it is only by its grace that private industry is allowed to keep any. Finally, it should said the President just does not understand business, having never worked for one, and does not understand the energy business in particular.

Of course, it is all politics but it is interesting to know what they are seeking to do. What are the horrendous tax breaks? How are they special?  Their proposals would increase government coffers about $4 billion a year. Let’s see $4 billion out of a $1 trillion plus anticipated deficits for this year and the next and the next. Bold thinking!

The benefit of attacking Big Oil-carrying the baggage of high gas prices and high profits-is it creates a nifty diversion from many of the conditions caused by these very policymakers, such as a collapsed dollar, incredible deficits, world political instability, environmental regulations, bans on leasing and drilling and the endless list goes on. 

I am not defending Big Oil or Big Anything. The good citizenship of the oil companies is reflected in the poverty of Nigeria, the pollution of the jungles of Ecuador, the corruption of Angola and the oppression of Equatorial Guinea to name only a few examples. However, these companies are in the business to make money for their shareholders. International oil companies have without a doubt exploited many a landowner, consumer, government and foreign dictator. They did not get this big for nothing as they do sell a global product that is essential to modern life.

The tax treatment of the industry is a serious question that taken in the right context deserves scrutiny. Contrary to the ranting of the ill informed, the industry is not treated any better or worse than other major businesses such as Obama darling General Electric. (A chief beneficiary of renewable tax subsidies).

Many in Congress seem to want to outlaw the rules of supply and demand as they continue to demonstrate they do not understand the concept. The advocates to selectively fleece a successful industry should stop the cheap theatrics and focus on real national energy solutions based on market policies, prudent regulations and prudent subsidies, technology development and research.