Rex Tillerson Defends ExxonMobil High Profits

“I saw someone characterize our profits the other day in terms of $1,400 in profit per second. Well, they also need to understand we paid $4,000 a second in taxes, and we spent $15,000 a second in cost,” Tillerson told ABC News’ Charles Gibson. “We spend $1 billion a day just running our business. So this is a business where large numbers are just characteristic of it.”

[…]

“We can’t drill our way out of this problem, just like we can’t conserve our way out of this problem, just like we can’t alternative fuels our way out of this problem,” he said. “There is no one solution to this; there’s an integrative set of solutions. And you have to undertake them all. So when the whole debate focuses around we have to choose this one solution or that, people are missing the point.”

Full Article and Video here.

Here’s a little refresher on profit margins again (cause they are the numbers that matter):

I’m for the ‘all of the above’ approach. How ’bout you?

Dems on Meet the Press: Kerry and Lieberman

The following was an interesting debate between Kerry and Lieberman. The videos were posted by a Lieberman hater – but I think they are quite revealing as to who is the reasonable candidate:

Obama’s Judgment? Seriously? Here’s a little more on Obama’s judgement. And here. And here. Also, note how Kerry talks about Medicare being a disaster… So why then would we want to hand over all healthcare to the government?

The reason they aren’t drilling there is because there’s no freaking oil there John Kerry. (or it is too difficult to get). 

John Kerry has some very strange views of the history in Iraq. Check out this bit about the Anbar Awakening. The things he claims haven’t happened – actually have, and even people who have been consistently hostile to the war in Iraq are having to admit it. Kerry still hasn’t got the memo yet.

Final question – as you watch these clips, note who sounds fairly reasonable – and who sounds flailing and desperate…

Obama’s New Ad: Marxism

Windfall Profits Tax = The State decides how much profit a business can make. If they are making ‘too much’ – the State then gets to take that profit away and redistribute it. That’s abject big government Socialism/Marxism wealth redistribution.

Obama conveniently failed to mention oil companies profit margin. Also, he neglected the fact that companies like Exxon Mobil already paid 3 times as much in taxes in 2007 as they made in profits.  And finally, these sort of ads seems to be assuming that oil companies only make money for a few sleazy suit-clad men sitting around at a board meeting. What they don’t point out is how many thousands and thousands average joe worker jobs there are in the oil industry.

Speaking of Windfall Profit Taxes, here’s what happened when President Carter tried them:

The Congressional Research Service called it total failure. I guess none of that matters though, because it sure feels really good to tax those evil oil bastards. Here’s a little more on this crap from the WSJ:

The “windfall profits” tax is back, with Barack Obama stumping again to apply it to a handful of big oil companies. Which raises a few questions: What is a “windfall” profit anyway? How does it differ from your everyday, run of the mill profit? Is it some absolute number, a matter of return on equity or sales — or does it merely depend on who earns it? 

If Senator Obama is as exercised about “outrageous” profits as he says he is, he might also have to turn on a few liberal darlings. Oh, say, Berkshire Hathaway. Warren Buffett’s outfit pulled in $11 billion last year, up 29% from 2006. Its profit margin — if that’s the relevant figure — was 11.47%, which beats out the American oil majors.

….consider Google, which earned a mere $4.2 billion but at a whopping 25.3% margin. Google earns far more from each of its sales dollars than does Exxon, but why doesn’t Mr. Obama consider its advertising-search windfall worthy of special taxation?

…..The point is that what constitutes an abnormal profit is entirely arbitrary. It is in the eye of the political beholder, who is usually looking to soak some unpopular business. In other words, a windfall is nothing more than a profit earned by a business that some politician dislikes. And a tax on that profit is merely a form of politically motivated expropriation.

It’s what politicians do in Venezuela, not in a free country.

Here’s our good ole’ buddy Speaker of the House Nancy Pelosi babbling on about why she won’t allow a vote on drilling:

Gotta love her plan: We will release the Strategic Oil Reserve which will make prices go down…and then what? Not to mention – what happens if we need that oil, for you know – strategeries or something. (Isn’t she basically admitting that it’s a supply problem anyway?) Also – force the oil companies to drill where it won’t be profitable. Like I said before, why not open a tanning salon in the middle of the Sahara while you’re at it and see how that works out? Plus, somehow opening up drilling around the US won’t make price go down in a more lasting fashion than opening up a little reserve tank that we have here in the states?

Like I said before, I don’t think ONLY DRILLING will solve the problem. But I do think we need to do everything possible to fix the problem.

Nancy Pelosi on Oil Prices

With skyrocketing gas prices, it is clear that the American people can no longer afford the Republican Rubber Stamp Congress and its failure to stand up to Republican big oil and gas company cronies.

[…]

Democrats have a commonsense plan to help bring down skyrocketing gas prices by cracking down on price gouging, rolling back the billions of dollars in taxpayer subsidies, tax breaks and royalty relief given to big oil and gas companies, and increasing production of alternative fuels.”

-Nancy Pelosi (April 24, 2006)

Here’s some recent audio from Nancy on the oil price problem:

Nancy’s Oil Plan:

  • Make oil companies drill where it wouldn’t be cost effective. (Maybe Baskin-Robbins should open an ice cream parlor in Antarctica while we’re at it.)
  • It would take 10 years for the price to reflect any change, if the government allowed oil companies to drill today. (Wrong. This is basic economics (see chart below): Investors will immediately see the potential that more oil will be added to the world supply and reinvest so they won’t get hosed – this will cause costs to go down. Plus, as Mark points out – it won’t take ten years. If there is money to be made – they’ll get the rigs in place ASAP.)
  • The high price of oil is only because we have to “two oil men,” (Bush & Cheney) in the Whitehouse. (Yeah, and they’re forcing the price higher right at the end of their term in office for what…so they can have even crappier approval ratings? Plus, doesn’t this sound a little conspiratorial? Where’s the evidence?)

Meanwhile – we should be investing in alternatives like solar and wind. How exactly are solar and wind energy going to fuel the millions of trucks, trains, planes, and ships that are distributing food and goods around the country and the world?

The other solution Pelosi has put forth is to wait for the magical clean energy solution to come along. Ok, I support that – except again, what are we going to power our distribution and transportation networks on until then…Hope?

We need a realistic solution for the energy situation now. Challenge American ingenuity to come up with a clean solution for the future — but if the oil companies know where the oil is, and can drill in a relatively environmentally safe way, why not let them?

Here’s a little supply and demand graph refresher:

  • P – price
  • Q – quantity of good
  • S – supply
  • D – demand

ht [Mark Levin Show]

Domestic Oil Production

Believe it or not, I really haven’t been all that impressed with the Republicans in Congress for the last several years. I feel like they have gotten a few things right – but it seems like they have failed to really promote and communicate policy that promotes Liberty, among other things. However – I do think they deserve credit for understanding the importance of energy independence. Today I ran across the following:

Congressman Roy Blunt put together these data to highlight the differences between House Republicans and House Democrats on energy policy:

ANWR Exploration
House Republicans: 91% Supported
House Democrats: 86% Opposed

Coal-to-Liquid
House Republicans: 97% Supported
House Democrats: 78% Opposed

Oil Shale Exploration
House Republicans: 90% Supported
House Democrats: 86% Opposed

Outer Continental Shelf (OCS) Exploration
House Republicans: 81% Supported
House Democrats: 83% Opposed

Refinery Increased Capacity
House Republicans: 97% Supported
House Democrats: 96% Opposed

SUMMARY

91% of House Republicans have historically voted to increase the production of American-made oil and gas.

86% of House Democrats have historically voted against increasing the production of American-made oil and gas.

HT: Powerline

I am all for developing alternative fuel sources and being sensitive to the environment, but realistically, we need a practical oil solution now. Freeing the oil companies to drill and produce oil here in the US seems to make sense, hence – I can grant credit to the House Republicans energy policy (at least attempted…) on this one. Anyone have any better ideas?

Understanding High Oil Profits

It’s that time of year again when the oil companies report their profits and everyone throws a fit. I admit, my own initial reaction to hearing about high profits is negative. But logical decisions and understanding are not based on gut reactions and emotional perceptions. Here is a great article from Investors Business Daily that adds some clarity to the role that profits play in supply side economics (I have added emphasis for skimmers):

Profits Of Doom?

Profits: Exxon Mobil’s first-quarter earnings of $10.9 billion, up 17% from a year earlier, are stirring outrage in Washington. Some are calling such profits “obscene.” What a sad lack of understanding of economics.

Case in point: Presidential candidate Hillary Clinton. Like her rival, Barack Obama, she’s pushing a massive “windfall profit” tax on those “greedy” oil companies. “There is something seriously wrong with our economy when Exxon’s record $11 billion in quarterly profits are seen as a disappointment by Wall Street,” Clinton said Thursday. “This is truly Dick Cheney’s wonderland.”
No, what’s seriously wrong is that politicians such as Clinton can cynically manipulate public opinion to enact disastrous policies.

Indeed, rather than be upset at Exxon’s profits, Americans should be thrilled — and angry at a Congress that doesn’t seem to want to encourage the oil industry to make even more.
Our free-market economy is built on profit. Higher profits mean more jobs, higher incomes, more investment in equipment and people, higher standards of living. Yes, profits are the engine for all of this — and that includes the profits of “Big Oil.”

By signaling that supply is scarce, higher profits encourage more production. Except, that is, when Congress through its inept lawmaking stands in the way. And that’s the case now with the oil industry.

Congress seems almost constantly at war with the oil companies — slapping them with taxes and pillorying their CEOs while ignoring the fact that higher profits lead to more exploration, drilling and development.

If anyone is to blame for our current energy mess, it’s Congress. At least 20 billion barrels of oil sit untapped in Alaska and another 30 billion lie offshore. Such sources that could help satisfy U.S. demand for years to come. Yet, Congress has put them out of bounds.
Instead, Congress scapegoats oil profits. In reality, according to Ernst & Young, from 1992 to 2006 the U.S. oil industry spent $1.25 trillion on long-term investment vs. profits of $900 billion.

Truth is, oil industry profits are in line with the rest of American industry. In 2007, a record year, they earned 8.3 cents per dollar of sales. Beverage companies and cigarette makers, by contrast, earned 19.1 cents. Drug makers, 18.4 cents. Indeed, all manufacturers, 8.9 cents on average, made more than “Big Oil.”

Besides, we’ve tried windfall profits taxes before, in the early 1980s, and they were an utter failure. As the Congressional Research Service found, revenues produced for the government were nearly 75% below what was expected. Meanwhile, domestic oil output fell 8%, while oil imports surged 16%.

That’s just poor policy, and even worse economics.

Remember: Oil companies don’t really pay “windfall profit” taxes, anyway. You do. Some 50 million Americans today own oil company stock, either directly or through 401(k)s and mutual funds. Don’t be suckered: “Windfall profits” taxes come right out of your retirement account, not out of the oil industry’s business.

Oh sure, Big Oil’s profits are up. But so are the taxes they pay. In 2006, that came to $90 billion — up 334% in just four years.

This is how Clinton-style populism works. It starts with ignorance and ends with serious damage to our economy.

Oil prices aren’t high because profits are up; they’re high because we don’t have enough oil. By clamping down on drilling, refusing to move forward on nuclear energy and hitting producers with punitive taxes, Congress is doing all it can to ensure we don’t have enough in the future.

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