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?

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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.

More Exxon Mobile Profits News

Excerpt:

With Americans paying nearly $4 a gallon for gas, oil company earnings have been political fodder of late.

Congressional Democrats said they are having a conference later in the day to call for an end to tax breaks for big oil firms.

Several bills have been introduced in Congress to enact a “windfall” profits tax on these earnings, or at the very least eliminate manufacturing tax exemption oil companies now enjoy. Presumptive Democratic presidential nominee Barack Obama wants to tax oil companies at a special rate every time crude goes over $80 a barrel.

Of course, does anybody ask about the profit margin that Exxon makes? No, cause that wouldn’t support the whole evil oil company theme.

And what exactly will adding tax when prices are higher do to the price of oil? It will make it higher. I think it’s amazing that anyone in congress wants to add windfall profit taxes to the oil companies. So the government now gets to decide when you have become too successful.

What do they think companies do with profits? Not to mention – Exxon just paid 32 billion in taxes. I guess that’s just not enough for the government. 

Perhaps more to come on this story as the day goes on…

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.