Exxon Mobil Part II

The following is a comment one of my esteemed associates left for me on the original Exxon Blog from last week, and I think it deserves a closer look.
"Yeah and then at some point in the future the government will have to subsidize Exxon when oil and profits drop and Exxon is spending $20-30 billion in new development. So Capitalism is fine unless someone actually makes a profit? How about lowering taxes on fuel? How about the millions driving SUVs and increasing demand? How about the speculators adding $10-20 per barrel simply due to geo-political risk? Do you really want to live in a society where the government can arbitrarily pick any company making too much money and appropriate part of their earnings at will?"

OK then, lets look at the bold part from above shall we...........

Had my friend taken the time to do a bit of homework he would have found that there are many Big Oil Government Subsidies currently on the books already and they have been for some time. Here are a few of them.

Firstly, there are the tax breaks at the Federal level which include the Pecentage Depletion Allowance which runs from 784 Million to 1 Billion per year, as well as the Nonconventional Fuel Production Credit at 769 - 900 Million / Year, followed by immediate expensing of exploration and development costs at 200 - 255 Million / Year, then the Enhanced Oil Recovery Credit for 26.3 - 100 Million / Year, Foreign Tax Credits at 1.11 - 3.4 Billion / Year, Foreign income deferrals at 183 - 318 Million / Year, and finally Accelerated Depreciation Allowances of 1.0 - 4.5 Billion / Year.
All that adds up to roughly 10 Billion / Year in Federal subsidies but they don't stop there. Lets move down to the State level now. Most state income taxes are based on oil firms' deflated federal tax bills and results in an undertaxation of 125 - 323 Million / Year. States also impose fuel taxes that are lower than regular sales taxes amounting to a subsidy of 4.8 Billion / Year to gasoline retailers.

New rules under the Taxpayer Relief Act of 1997 provide a further subsidy 2.07 Billion / Year. In total, the annual tax breaks that support gasoline production and use amount to close to 18 Billion / Year.

Now lets discuss the Program subsidies that support the extraction, production, and use of petroleum which totals 38 - 114.6 Billion / Year. Beyond all the above, The government as well as tax payers subsidize a large portion of the protection services that are required by the petroleum producers. Foremost among these costs is the cost of military protection which adds another 55 - 96.3 Billion / Year to the subsidy extravaganza.

All said and told we are talking about a couple of Hundred Billion a year bailout for the Oil Industry and this is while they are making record profits quarter after quarter.

So, it's no wonder that people get ticked when they pay high prices for gas at the pumps Right?
Exactly.

Here endeth the lesson.

Figures used for this commentary were supplied by The Progress Report - What Gas Really Costs Us.