DENNIS SEID: Tax break for Big Oil is taxing problem

By Dennis Seid/NEMS Daily Journal

Last year, the five major oil companies – ExxonMobil, ConocoPhillips, BP America, Shell Oil Co. and Chevron Corp. – had combined revenues of $1.5 trillion.
All but one, BP, posted sizable profits as well. Taking away BP’s $3.7 billion loss – largely stemming from the Deepwater Horizon disaster in the Gulf – the other four companies tallied some $75 billion in profits.
The world’s largest oil company, ExxonMobil, accounted for $30.5 billion in profits, a 57 percent increase from 2009.
By contrast, Walmart, the world’s largest retailer, netted $14.3 billion in profit off sales of $405 billion.
Recently, Rex Tillerson, chairman and CEO of ExxonMobil, said this about its most recent first-quarter performance:
“ExxonMobil’s earnings reflect continued leadership in operational performance during a period of strong commodity prices. Earnings were $10.7 billion, up 69 percent from the first quarter of 2010, reflecting higher crude oil and natural gas realizations, increased refining margins and record Chemical performance.
“In the first quarter, capital and exploration expenditures were $7.8 billion, up 14 percent from last year, as we continue with plans to invest between $33 billion and $37 billion per year over the next five years to develop new energy supplies to meet future demand growth.”
The company, by the way, returned about $19 billion to investors, via dividends and stock repurchases. And it’s those kind of numbers that have politicians frothing at the mouth to cut – and defend – the oil companies’ tax breaks.
Last week, the U.S. Senate blocked a bill that would have repealed $2 billion a year in tax breaks for the Big 5.
Supporters of the bill – mostly Democrats – said the oil companies wouldn’t miss it. Opponents – mostly Republicans, but some Democrats, too – said a repeal is tantamount to a tax increase that would hurt domestic drilling and do nothing to cut the price at the pump.
Of course, most Democrats accuse the Republicans of looking after the interests of big business over the interest of average Americans.
Lawmakers from both parties from oil-producing states say small and medium-sized businesses involved in oil production would see tax increases if the Big Oil subsidies are eliminated. And they say that the companies would merely pass the price on to consumers.
Ending the tax breaks would cost the oil companies about $21 billion over 10 years, according to Congress’s Joint Economic Committee.
The nonpartisan Congressional Research Service said eliminating the tax breaks would not likely lead to high gas prices.
We’ve heard politicians say government has to look at everything when it comes to cutting the nation’s $14 trillion deficit. If Medicare and Social Security can be thrown into the discussion, why can’t Big Oil?
Two billion dollars isn’t a lot – but when you start adding a few billion here, a few billion there, it adds up.
Yes, it’s a taxing situation to figure out what we need to do. But all the political posturing is getting us nowhere. And all we can do is snarl and bear it.

Contact business editor Dennis Seid at (662) 678-1578 or dennis.seid@journalinc.com.