CAP Blames Oil Companies for the World's Problems


Posted by Chris Prandoni on Wednesday, March 21st, 2012, 3:06 PM PERMALINK


In typical Center for American Progress (CAP) partisan  fashion, Daniel Weiss manages to blame oil companies for the price of gasoline, America’s overspending problem, the inefficiency of biofuels, and for not drilling on land the federal government refuses to lease. But don’t let ‘em off so easy, Mr. Weiss, oil and natural gas producers are also responsible for the Iraq war, world hunger, and that time I wrecked my ATV and broke my arm (it was powered by gasoline!). The genesis of Mr. Weiss’s stream of consciousness post is both the Paul Ryan budget, which preserves standard expensing provisions for oil and natural gas producers, and Sen. Menendez’s reintroduction of his humorously titled “Close Big Oil Tax Loopholes Act”.

Grasping at air, Mr. Weiss concludes that the “the Ryan budget compounds the cost of high oil and gasoline prices on the middle class” because the budget appropriately eliminates Solyndra-like government spending on biofuels which, one day, might be able to displace America’s oil consumption. Mr. Weiss misses the joke that reducing government spending mitigates the government’s burden on the middle class. While ATR and Mr. Ryan argue that the government has no business helping companies turn algae into something you can put in your gas tank, no one seriously believes that biofuels will alleviate consumers’ pain at the pump anytime soon.

What would, in fact, “compound the cost of high oil and gasoline prices on the middle class” is exactly what CAP, Obama, and Sen. Menendez are proposing: raising taxes on oil and natural gas producers to the tune of $40 billion. When you tax something you get less of it—“it” in this instance being jobs, economic productivity, and oil. For a more nuanced explanation, I refer readers to an American Petroleum Institute commissioned study.

ATR has written extensively about the gimmicks CAP uses to scapegoat oil and natural gas companies as tax dodgers, a narrative The Wall Street Journal highlights in a recent editorial. From the WSJ:

Here's a staggering fact: The Tax Foundation estimates that, between 1981 and 2008, oil and gas companies sent more dollars to Washington and the state capitols than they earned in profits for shareholders.

Exxon Mobil, the world's largest oil and gas company, says that in the five years prior to 2010 it paid about $59 billion in total U.S. taxes, while it earned . . . $40.5 billion domestically. Another way of putting it is that for every dollar of net U.S. profits between 2006 and 2010, the company incurred $1.45 in taxes. Exxon's 2010 tax bill was three times larger than its domestic profits. The company can stay in business because it operates globally and earned a total net income after tax of $30.5 billion in 2010 on revenues of $370.1 billion.

Crunching Compustat North America numbers, API estimates that the average effective tax rate for oil and gas companies is 41.1% for 2010—i.e., taxes as a share of net income. That is broadly in line with the Energy Information Administration's estimates for "major energy producers." By the same measure, other manufacturers on the S&P Industrial index pay an effective rate of 26.5%.

I’d encourage everyone to read this great piece. But you get the point, oil and natural gas producers pay a lot in taxes. Mr. Weiss also blames oil companies for not creating more jobs, which is silly, since the Obama Administration has made it nearly impossible to do so by delaying or cancelling lease sales and drilling permits. Mr. Weiss is trying to have his cake and eat it too; his endgame is less American oil and natural gas production which consequently leads to, you guessed it, fewer jobs. That’s like blaming oil companies for not building the Keystone pipeline, which Obama killed.

There are a lot of reasons why gasoline is so expensive these days, but the Obama Administration has done little, if anything, to alleviate consumers’ pain at the pump. Conversely, Republicans have rightly proposed increased oil and natural gas production which would create hundreds of thousands of jobs and add billions of barrels of oil to the world marketplace.

More on Paul Ryan budget’s spending and tax proposals.

More from Americans for Tax Reform

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