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blessedinnyc -> RE: Oil hits $135/barrel- what does this mean for the economy? (5/22/2008 6:48:53 PM)
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ORIGINAL: kernsfamily
And, then, when your job moves once again, then what? I've lived in the DFW metroplex area for 11 years, and this is my 4th workplace....
Perhaps you should find another employer- or at the very least, convince your employer to set up a van or bus system. My friend at Microsoft gets a free ride home every evening on the company bus. Actually, if I stay late enough, I get a free car ride home, but that's another story.
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Politicians, or oil companies, can't do much about the global oil markets. If politicians of BOTH parties are "in the pockets", as you say, then why does ONE party in particular make it impossible to build more capacity in the refining side of the business, to increase drilling production or allow refineries to use "economies of scale" to everyone's benefit, and scrap the "boutique" blends that are mandated specially for each and every state?
Actually, increasing refining capacity would hurt a lot of refiners. In fact, back in the 1980s, the AEI issued internal memos about refiners getting together to cut excess capacity. (In other words, collude to increase refining crack spreads.)
That said, making more oilfields available to energy companies would be a good thing- at least over the course of 10 years- to most oil companies if oil were a renewable resource. Because it isn't, the situation gets a whole lot more complicated. The question is whether we should use the oil in ANWR now or when oil prices are $200/barrel. In all honesty, I'm happy that we weren't pumping in ANWR when oil was $25/barrel and the oil industry was pushing for it. I'm not sure what a good price is, but I do know that it's better for us to start pumping in ANWR when prices are high rather than when they're low.
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Any idea how much Exxon Mobil paid the federal government in taxes last year? While the news reporters go on and on that Exxon earned a "record" $40 billion in profits (never mentioning that it was on "record revenues" at a 9% or so profit margin, which, is on the "low side" of "normal" for a company today), that they paid a record $30 billion in corporate income taxes!.....and that's not including the taxes confiscated by the state & federal governments at the pump!
But a lot of companies pay a lot in taxes. Take McGraw-Hill, for example. In 2007, McGraw-Hill reported income tax expense as 37.5% of income. This, of course, doesn't include sales taxes on various books it publishes, payroll taxes, unemployment taxes, and more. Chevron, on the other hand, which operates in 60%-tax Venezuela, still pays only 40% of its pre-tax income in taxes.
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Want to know who REALLY makes a "killing" on the production of oil, the refining and the sale of gasoline? the government does. Makes far more than the oil companies do.
But in some ways, it makes sense from an economic standpoint. Profits tend to move upstream. If gas station owners are making a killing, that means refiners will eventually start making a killing, which means oil companies will eventually start making a killing. Since governments supply the "sovereignty" required to maintain an oil company's ownership of its facilities, it makes sense that an oil company's sovereignty expenses (taxes, royalties, etc.) will also increase.
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I live within a stone's throw of Exxon Mobil's HQ in the Dallas area....many of my neighbors are employed there (among thousands of the hardworking people who work there, and have VERY VERY good jobs)....the media loves to portray the "big oil" business as a few big high-paid execs....the oil business is far more than that....it's the livlihood of millions of people....and they are just as frustrated with the global markets as you are....
I don't think we need to defend Big Oil's employees- exorbitant CEO pay should be something that stockholders should be responsible for clamping down on. The fact is that millions of grandparents, orphans, and everyday families are counting on oil company profits to keep up with inflation. If government intervenes too heavily, that won't happen. This will mean a lot of angry seniors in the voting booths come 2010 or 2012.
And the fact is that if oil remains at $135/barrel and oil companies can deduct salaries from their income tax expense, nobody's gonna get fired if tax rates go up. It makes just as much sense to hire employees if tax rates are 35% or 50%- just as long as the rate on employee salary deductions stay the same.
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Most people in the oil business are just "regular guys"....many grew up in West Texas....got started in the business by working the oil rigs either on land or offshore....and, got an education and worked hard....
I think Steve Simon (exxon mobil) is the guy you are referring to....he started out working at a refinery in Louisiana....after being in the Army in the late 1960s in Vietnam. At what "salary range" did he "cease" being a "regular guy"????
But many aren't. I actually met one of BP's oil traders when I did an on-site visit way back in college while I was job hunting. He's 26, makes eight figures, and owns a mansion on Lake Michigan outright.
BP, for example, hires kids straight out of the Ivy League (and also will stoop to recruit from the humble Big Ten on occasion) to run their supply and trading operations. Many of the people making money off of high oil prices have more in common with Donald Trump than you and me- or more likely, have more in common with the Saudi royal family than they have with you and me.
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Many forget 1998....oil was $10/barrel....gasoline was selling at 89¢ here in town, and the oil companies were capping wells, while the "service companies" (Halliburton, Schlumberger, etc...etc...) were laying of vast amounts of people....since the cost to drill and capture the oil as far more expensive than what it was worth?
The past four years have been more than enough to make up for the losses back in '98.
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as far as these "congressional" hearings go...it's just an election year "dog & pony" show for the politicians.....they really don't care what the oil company managers have to say.....they just want their "soundbites" to be on the evening news.....
I agree that congress hasn't done a whole lot to help in the past year; if they were interested in helping out the economy, they could lower the national speed limit, open up ANWR, make SUVs illegal, or come up with an energy policy, but they haven't exactly sat on their behinds the entire time. They have offered tax credits for hybrids and increased CAFE standards, for example. And the Hybrid tax credit is now making the ability to convert nuclear energy into energy that can run your car a serious possibility- manufacturers are starting to develop plug-in hybrids that can run on either gas or electricity produced here at home.
However, I think their concerns- and anger- about high energy prices are well-justified. I don't know if punishing oil companies- which help keep oil prices down with the oil they produce- is going to help, but I do think that oil executives might be some of the best-positioned people to explain to Congress why oil prices are so high.
One group that is notably absent from these hearings are the hedge fund managers. I don't agree with Carl Levin's proposal to regulate American citizens trading on foreign exchanges (thus putting Americans at a disadvantage to people who might consider moving to the Bahamas or Dubai), but I think some disclosure on large positions held by hedge funds to FERC might make some sense. We'll be happy to let Amaranth corner the natural gas market on the ICE if they at least notify FERC that they are doing this. If we must have people playing games with the markets, it would at least be better for them to be doing it in the US- and letting regulators know what's going on- than having London or Dubai-based hedge funds do this to American consumers.
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