Yes, Big Oil is doing just fine…
Nearly $1 trillion – that’s the total profit earned by the top five multi-national oil companies over the first decade of the new millennium. $36.5 billion – that’s the total in tax subsidies the American public will provide to the oil industry over the next decade. $53 billion – that’s the value that oil companies could receive from not paying royalties on some Gulf of Mexico production over the next 25 years. And 1916 – the oldest tax subsidy the oil companies still utilize.
On the same day that the final major oil firm reported their fourth quarter and year-end earnings reports, Rep. Edward J. Markey (D-Mass.), the Ranking Democrat on the House Natural Resources Committee, released a report prepared by the Committee’s Democratic staff that analyzed the high profits earned by the largest companies in the oil industry, and their continuing dependency on tax subsidies despite those profits. Today’s report comes at a time when crude prices have risen above $100 per barrel in global markets reportedly due to concerns over political unrest in the Middle East.
“American consumers and small businesses are all told that they will have to tighten their belts, and do their share to bring down our deficit and grow our economy,” said Rep. Markey, who is the top Democrat on the Natural Resources Committee. “Yet even when their top five companies make nearly $1 trillion in profits over the last 10 years, they still defend with a straight face the billions in tax breaks and regulatory subsidies they stand to rake in over the next decade.
“Oil companies simply don’t need 100 year-old subsidies to sell $100 per barrel oil,” continued Markey.
The full report is available here.
The top five oil companies reported total year-end profits of $77 billion, despite a yearly loss for BP due to their oil spill in the Gulf of Mexico. All told, the five companies — BP, Chevron, ConocoPhillips, ExxonMobil and Shell — made $952 billion in profits over the last 10 years, a decade when oil spikes and higher gas prices ate up more of every American’s paycheck. Over the last year, gas prices have outpaced the global economic recovery, now rising to an average of $3.10 per gallon nationally, 44 cents higher than during the same period last year.
The Markey staff report highlights that most oil industry tax subsidies have been on the books for decades, a relic of times when oil industry reserves were plentiful, but untapped. Two of the main tax breaks have been on the books since 1916 and 1926. The 1916 tax break was put on the books just three years after the 16th amendment established the power of the government to levy direct income taxes. Ending just these two subsidies would raise $18 billion over the next decade for the American people.
Since extracting oil even in the deep waters of the Gulf of Mexico can be done for as little as $10 per barrel, and oil is trading near $100 a barrel, revoking the tax subsidies enjoyed by the oil industry will not affect prices in a global market or prices at the pump for consumers, the report says.
The Congressional report notes that the windfalls for the top oil companies haven’t resulted in more research and development into alternatives or other consumer-protecting measures, but instead have been recycled back to shareholders and stock buybacks that benefit executives at the companies. Net profits directed towards dividends and stock repurchases for the big 5 oil companies have gone from 58 percent in 2005 to 89 percent in 2009.
“The oil companies are using tax subsidies put in place shortly after the turn of the 19th century to increase their profits as they move through the 21st century. These subsidies are not needed to ensure continued domestic production. They only get passed along to oil company shareholders and executives,” said Rep. Markey. “This outdated legacy of special tax breaks for oil companies is a drag on an American energy system that is rapidly reorienting to the 21st century. It is badly out of step with an American public that is looking to their government to develop serious solutions to rising fiscal deficits.”
President Obama called for revoking these tax subsidies in his state of the union address last week. And the report notes that the previous U.S. president, George W. Bush, said in 2005, “With oil at more than $50 a barrel, by the way, energy companies do not need taxpayers’-funded incentives to explore for oil and gas.”
Rep. Edward J. Markey (D-Mass.) Staff Press Release for Oil Company Profits and Tax Subsidies Report