Big Oil Isn't The Devil
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
Even though that's the popular thing to do these days, I just can't seem to get on that bandwagon.
Lots of people, especially people in Congress, like to vilify Big Oil.
People like U.S. Rep. Bart Stupak, a Democrat from Michigan.
He recently sponsored the Federal Price Gouging Prevention Act. This, of course, was aimed at Big Oil.[[In-content Ad]]I could write an entire column on how Stupak, ah, I mean stupid this bill is. But let me just breeze you through the alleged logic.
Big Oil is raising the price of gas. That's bad because we use lots of gas.
So Stupak sponsors a bill that seeks to destroy the free market system for gasoline.
(He actually got the Speaker of the House, Nancy Pelosi, to endorse this nonsense and it actually passed the House.)
The bill would impose fines and jail on gas station owners or anybody else who deals with fuel who raises prices too much.
How much is too much?
Well, that would be determined by some bureaucrat.
It's nutty.
I am a big fan of the free market. It has a pretty handy way of dealing with surpluses or shortages. That would be prices. It's hard to get around the logic of supply and demand unless, of course, you're a Congressman.
Feel like waiting in line for gas? If this legislation passes, I can virtually assure that's what will happen when the inevitable shortages kick in.
Don't take my word for it. Here's what Mario Lewis of the Competitive Enterprise Institute has to say.
"Constraining the ability of gas companies to set prices according to supply and demand is a recipe for rationing. In the end, there will be less gas available and the people who will get it will be those most prepared to wait in line.'
Besides, the Federal Trade Commission has investigated gas price gouging again and again and has come up empty, so it's not like it's a real burning issue in the first place.
But gas prices have risen and politicians seem to think if they holler price gouging enough times, voters will keep them in office.
It's really quite disingenuous.
So as politicians and the media rag on Big Oil as price gougers and bad actors in the corporate world, I thought I would try to take an objective look at a Big Oil company.
Here are just a few tidbits from ExxonMobil's "Corporate Citizen Report 2006."
The company reports improved energy efficiency at its facilities. Steps taken since 1999 resulted in CO2 emissions savings of 11 million metric tons in 2005, equivalent to taking 2 million cars off the road.
The company is providing $100 million to Stanford University's Global Climate and Energy Project - the largest-ever independent climate and energy research.
ExxonMobil now has interests in about 100 cogeneration facilities in more than 30 locations worldwide with a combined capacity of 4,300 MW of power. That cogeneration capacity reduces global CO2 emissions by more than 10.5 million metric tons annually.
In 2006, ExxonMobil awarded $9 million in grants through the Africa Health Initiative and more than $2.5 million through the Educating Women and Girls Initiative. According to a recent report released by the Malaria R&D Alliance, ExxonMobil is the largest private sector donor, outside of the pharmaceutical industry, to malaria research activities.
ExxonMobil will become a founding sponsor of the National Math and Science Initiative in the United States in 2007 and will commit $125 million to support the initiative.
In 2006, ExxonMobil, its divisions and affiliates, along with the ExxonMobil Foundation, provided a combined $138.6 million in charitable contributions and community investment worldwide.
Perhaps Big Oil isn't quite as vile as it is portrayed.
And who really makes the most money from gasoline?
Big Oil makes about 13 cents per gallon. The federal government makes 18.4 cents per gallon. Then there are the states. When you combine state and federal taxes, the average surcharge on a gallon of gas nationwide is 42 cents.
The highest tax is in Hawaii at 53.5 cents per gallon. The lowest is in Alaska at 26.4 cents.
It's also interesting to note that at $3.07 per gallon, gas is cheaper in inflation-adjusted dollars than it was in 1981.
And then there are the profits. The media generally reports the "record profits" of oil companies but fail to put those profits in context.
Take Exxon Mobil Corp.'s $9.9 billion third-quarter profit.
That's a lot of money to be sure, but Exxon doesn't make as much relative to its product as many other industries do.
If you compare profit margins - dividing net profits by the amount of revenue the company took in - shows that other companies enjoy much higher returns.
Exxon's profit margin for its $9.9 billion quarter was almost 10 percent.
But the average of all manufacturers is around 8.5 percent. Computer technology firms make around 11.5 percent; chemical companies, 13.5; electronic equipment, 14; beverage and tobacco, 19.5; and pharmaceuticals, 22.5.
More specifically, cigarette maker Altria Group made 22 cents for every dollar of revenue in 2004, and pharmaceutical company Merck made 25.3 cents for every dollar of revenue that year.
Alan Caruba is a writer who closely follows the energy industry. He writes a weekly column, 'Warning Signs,' posted on www.anxietycenter.com He's also the author of 'Right Answers: Separating Fact from Fantasy.'
He sums it up pretty well for me:
"It's not that Big Oil isn't making billions, but it is also spending billions to ensure that you can have gasoline for your car and oil to heat your home, plus all the other products that are derived from oil. And Big Oil faces a world of problems in the process. As Business Week recently noted, 'Much of the global oil patch is now off-limits.'
"In case you haven't noticed, Hugo Chavez, Venezuela's president, intends to take over the assets of the oil companies that have invested billions in that nation. In Nigeria, the oil industry is under attack from various factions. Iraq, now free of Saddam Hussein's butchery, has yet to meet a reasonable standard of productivity. Iran has announced a rise in the price of gasoline because it lacks refinery capacity. Other areas of the world, such as deepwater wells, require enormous sums of money to explore, drill, extract and transport oil.
"So, you may be a bit more inclined to cut Big Oil a bit of slack. I think about that every time I fill up my car's tank."
Even though that's the popular thing to do these days, I just can't seem to get on that bandwagon.
Lots of people, especially people in Congress, like to vilify Big Oil.
People like U.S. Rep. Bart Stupak, a Democrat from Michigan.
He recently sponsored the Federal Price Gouging Prevention Act. This, of course, was aimed at Big Oil.[[In-content Ad]]I could write an entire column on how Stupak, ah, I mean stupid this bill is. But let me just breeze you through the alleged logic.
Big Oil is raising the price of gas. That's bad because we use lots of gas.
So Stupak sponsors a bill that seeks to destroy the free market system for gasoline.
(He actually got the Speaker of the House, Nancy Pelosi, to endorse this nonsense and it actually passed the House.)
The bill would impose fines and jail on gas station owners or anybody else who deals with fuel who raises prices too much.
How much is too much?
Well, that would be determined by some bureaucrat.
It's nutty.
I am a big fan of the free market. It has a pretty handy way of dealing with surpluses or shortages. That would be prices. It's hard to get around the logic of supply and demand unless, of course, you're a Congressman.
Feel like waiting in line for gas? If this legislation passes, I can virtually assure that's what will happen when the inevitable shortages kick in.
Don't take my word for it. Here's what Mario Lewis of the Competitive Enterprise Institute has to say.
"Constraining the ability of gas companies to set prices according to supply and demand is a recipe for rationing. In the end, there will be less gas available and the people who will get it will be those most prepared to wait in line.'
Besides, the Federal Trade Commission has investigated gas price gouging again and again and has come up empty, so it's not like it's a real burning issue in the first place.
But gas prices have risen and politicians seem to think if they holler price gouging enough times, voters will keep them in office.
It's really quite disingenuous.
So as politicians and the media rag on Big Oil as price gougers and bad actors in the corporate world, I thought I would try to take an objective look at a Big Oil company.
Here are just a few tidbits from ExxonMobil's "Corporate Citizen Report 2006."
The company reports improved energy efficiency at its facilities. Steps taken since 1999 resulted in CO2 emissions savings of 11 million metric tons in 2005, equivalent to taking 2 million cars off the road.
The company is providing $100 million to Stanford University's Global Climate and Energy Project - the largest-ever independent climate and energy research.
ExxonMobil now has interests in about 100 cogeneration facilities in more than 30 locations worldwide with a combined capacity of 4,300 MW of power. That cogeneration capacity reduces global CO2 emissions by more than 10.5 million metric tons annually.
In 2006, ExxonMobil awarded $9 million in grants through the Africa Health Initiative and more than $2.5 million through the Educating Women and Girls Initiative. According to a recent report released by the Malaria R&D Alliance, ExxonMobil is the largest private sector donor, outside of the pharmaceutical industry, to malaria research activities.
ExxonMobil will become a founding sponsor of the National Math and Science Initiative in the United States in 2007 and will commit $125 million to support the initiative.
In 2006, ExxonMobil, its divisions and affiliates, along with the ExxonMobil Foundation, provided a combined $138.6 million in charitable contributions and community investment worldwide.
Perhaps Big Oil isn't quite as vile as it is portrayed.
And who really makes the most money from gasoline?
Big Oil makes about 13 cents per gallon. The federal government makes 18.4 cents per gallon. Then there are the states. When you combine state and federal taxes, the average surcharge on a gallon of gas nationwide is 42 cents.
The highest tax is in Hawaii at 53.5 cents per gallon. The lowest is in Alaska at 26.4 cents.
It's also interesting to note that at $3.07 per gallon, gas is cheaper in inflation-adjusted dollars than it was in 1981.
And then there are the profits. The media generally reports the "record profits" of oil companies but fail to put those profits in context.
Take Exxon Mobil Corp.'s $9.9 billion third-quarter profit.
That's a lot of money to be sure, but Exxon doesn't make as much relative to its product as many other industries do.
If you compare profit margins - dividing net profits by the amount of revenue the company took in - shows that other companies enjoy much higher returns.
Exxon's profit margin for its $9.9 billion quarter was almost 10 percent.
But the average of all manufacturers is around 8.5 percent. Computer technology firms make around 11.5 percent; chemical companies, 13.5; electronic equipment, 14; beverage and tobacco, 19.5; and pharmaceuticals, 22.5.
More specifically, cigarette maker Altria Group made 22 cents for every dollar of revenue in 2004, and pharmaceutical company Merck made 25.3 cents for every dollar of revenue that year.
Alan Caruba is a writer who closely follows the energy industry. He writes a weekly column, 'Warning Signs,' posted on www.anxietycenter.com He's also the author of 'Right Answers: Separating Fact from Fantasy.'
He sums it up pretty well for me:
"It's not that Big Oil isn't making billions, but it is also spending billions to ensure that you can have gasoline for your car and oil to heat your home, plus all the other products that are derived from oil. And Big Oil faces a world of problems in the process. As Business Week recently noted, 'Much of the global oil patch is now off-limits.'
"In case you haven't noticed, Hugo Chavez, Venezuela's president, intends to take over the assets of the oil companies that have invested billions in that nation. In Nigeria, the oil industry is under attack from various factions. Iraq, now free of Saddam Hussein's butchery, has yet to meet a reasonable standard of productivity. Iran has announced a rise in the price of gasoline because it lacks refinery capacity. Other areas of the world, such as deepwater wells, require enormous sums of money to explore, drill, extract and transport oil.
"So, you may be a bit more inclined to cut Big Oil a bit of slack. I think about that every time I fill up my car's tank."
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