Exxon reaps record profits; McCain reaps two-faced propaganda

Even now that the economy is hitting the skids bigtime and the price of oil is back down below $100 ($66 per barrel on Oct. 30 according to CNNMoney)—prompting OPEC at its Vienna meeting to decide to cut production, after months of high output (WSJ, Oct. 25)—Exxon’s profits continue to break records. John McCain seizes on this to take a cheap (if none too logical) shot at Obama…

First, the Chicago Tribune’s The Swamp blog points out the bizarre irony of McCain’s latest charges:

Obama’s a socialist corporate tool?
One day, Sen. John McCain is pushing the notion that Sen. Barack Obama is a socialist intent on spreading the wealth of higher-paid Americans to lower-income Americans. Today, McCain was pitching the idea that Obama was a corporate tool for the oil industry.

Here’s what McCain said this morning at his Defiance, Ohio rally following Exxon Mobil’s announcement of its record corporate profits.

Today — (cheers, applause) — today ExxonMobil reported record profits. Senator Obama voted for billions in corporate giveaways to the oil companies. I voted against it. (Cheers, applause.) When I’m president, we’re not going to let that happen.

Conflicting messages, yes. But this is clearly throw-it-all-against-the-wall-and-see-what-sticks time for the McCain campaign.

Next, the Washington Independent points out that both candidates have actually voted for Big Oil tax-breaks, and both have taken money from the oil companies—but McCain way more!

Which Candidate Does Exxon Have a Bigger Crush On?
Shock, surprise! Exxon Mobil Corp. reported record-breaking quarterly profits today. The oil company earned $14.83 billion in its fiscal third quarter, more than any company in U.S. history.

Hearing the news, Sen. John McCain accused Sen. Barack Obama of being in the pockets of Big Oil, a charge Obama has repeatedly leveled at McCain in campaign ads. McCain blasted Obama for supporting tax breaks for oil companies in a 2005 energy bill.

The Arizona senator didn’t mention, however, that he and Obama recently voted for a piece of legislation — the energy package tacked onto the $700-billion bailout bill — that gave even more tax breaks to oil companies. Passage of the energy package — whose primary purpose was to bolster clean energy — was continually delayed because Republicans in Congress refused to support a bill that didn’t help fossil-fuel companies.

Neither presidential candidate has talked about how much money his campaign has received from the big, bad oil companies. Here are the numbers: The McCain campaign has received $1.3 million, while the Obama team has gotten $400,000.

Stick that in your barrel and refine it.

See our last posts on the presidential horse-race, the struggle for global oil, and petro-oligarchical rule.

  1. Obligatory oil-price conspiracy theory
    We don’t want to get too conspiratorial here… But isn’t it interesting that the last time oil prices were falling was in the prelude to the 2006 mid-term elections? We predicted at the time that prices would rise again right after the elections. We wrote that “the White House is playing us like a violin, and hopes to pull the same trick again before the 2008 elections.” We really do hate being right about these things…

    1. what price are you looking at?
      The current WTI future dipped under 60 in early 2007.

      Oil has moved in tandem with US equities of late but the producers are in control now. El-badri said he expects the market to respond to the latest cuts next week so it seems you’ve got your conspiracy right there in plain view.
      They don’t control short-term prices though and I doubt anyone is in a position to guess exactly when the prices are going to climb back to a satisfactory level. If consumption keeps dropping, it could take a while as producers would presumably lose control until enough of them go out of business.

  2. Exxon-Mobil pays $2.69 in
    Exxon-Mobil pays $2.69 in taxes for every dollar of its record profits. How come they never announce the record breaking tax revenue the government is receiving, almost 3 times Exxon-Mobil profits.


    in NYC its $9.00 for a pack of smokes, after production cost and billions in law suits, The big Evil Tobacco companies net about .50 to $1.00 per pack. the total gov take is $6.00

    the gov sued banks and fored them to make bad loans.

    the gov is not the answer to the prolbem it is the reason for most prolbems in the country.

    take responsibility for your own life and you will be truly happy.

    1. No they didn’t
      A tax rate of more than 200%? Even Fox Business News (Oct. 30) didn’t say that:

      ExxonMobil exceeded expectations in the latest quarter, reporting the largest quarterly profit in the history of mankind with $14.83 billion on revenue of $137.74 billion. Not too shabby.

      And taxpayers have benefitted. Yes, the company earned a record amount, but it paid out a record amount in taxes. The company paid a 43.3% tax rate. It paid $11.33 billion in income taxes, $9.33 billion in sales taxes and $11.85 billion in other taxes. That means it paid total taxes of $32.51 billion in the current quarter.

      But don’t forget the loopholes. An excerpt from the book Take the Rich Off Welfare by Mark Zepezauer and Arthur Naiman (Odonian Press, 1996)

      [T]he oil depletion allowance lets certain companies deduct 15% of the gross income they derive from oil and gas wells from their taxable incomes, and continue to do that for as long as those wells are still producing. Some smaller companies get to increase the deduction by 1% for every dollar the price of oil falls below $20 a barrel.

      This tax break, on which we lose about $1 billion a year, can add up to many times the cost of the original exploration and drilling. In fact, it formerly could amount to 100% of the company’s profits-in which case the company paid no taxes, no matter how much money it made. Presently this is capped at 65% of profits.

      The rationale for this loophole is that it encourages exploration for new oil-presumably something no oil company would otherwise do. Oil industry executives argue that other businesses are allowed to depreciate the costs of their manufacturing investments. That’s true, but they’re only allowed to take off the actual cost of those assets, not deduct 15% of their gross income virtually forever.

      Introduced in 1926, the oil depletion allowance was restricted in 1975 to independent oil companies that don’t refine or import oil. To make up for this, the larger, integrated companies were given the intangible drilling cost deduction, which in some ways is even better.

      It lets them deduct 70% of the cost of setting up a drilling operation in the year those expenses occur, rather than having to depreciate them over the expected life of the well. The other 30% they can take off over the next five years. This boondoggle costs us about $500 million a year.

      A third tax break is the enhanced oil recovery credit. It encourages oil companies to go after reserves that are more expensive to extract-like those that have nearly been depleted, or that contain especially thick crude oil. The net effect of this credit, which costs us $500 million a year, is that we pay almost twice as much for gasoline made from domestic oil as we do for gas made from foreign oil.

      Together, these three loopholes sometimes exceed 100% of the value of the energy produced by that oil. In other words, it would be cheaper in some cases for the government to just buy gasoline from the companies and give it to taxpayers free of charge.

      Figures can’t lie, but liars can figure.

  3. What they voted for
    This hardly got any coverage, and it is very instructive that both McCain and Obama voted for it. From the Los Angeles Times, Oct. 4:

    ‘Dirty fuels’ profit by bailout bill’s tax breaks for renewable energy
    Incentives mean billions for coal and oil projects that increase emissions.

    The renewable-energy tax incentives tucked into the financial bailout package passed by the House on Friday include billions of dollars in breaks for old-fashioned fossil-fuel processes such as liquefying coal and squeezing petroleum out of sand and rock.

    These “dirty fuels” are making a tentative comeback among policymakers. Such ventures are aimed at “unconventional” deposits once deemed too expensive or technologically difficult to tap. Backers of the tax breaks believe the substantial incentives might boost these technologies and spur invention of new ones.

    “We feel good about the outcome here, in terms of the government supporting our requirements,” said Larry Winter, vice president of Oil Shale Producing Exploration Co., which operates an experimental project in Utah’s Uintah Basin. “As we start to expand our project, we will be looking to build our own refinery. That requires a very large capital investment that requires long-term paybacks. Without government support, they are potentially a nonstarter.”

    Critics of the measures note that the breaks run counter to the carbon-reduction message Congress intended when it vowed to bankroll clean, renewable technology. And a substantial portion of the tax breaks go to energy companies already flush with record oil profits.

    “This is deeply offensive that they would attach this massive lobby goodie bag to a bill,” said Tyson Slocum of Public Citizen, a Washington-based public interest organization.

    “This is a gravy train. The American people are suffering here, and oil companies are getting a tax break. Not even clean energy. This is not a way to make laws. This is not even a way to make sausage.”

    The provisions are found in the complicated tax-extenders legislation tacked on by the Senate after the House rejected the original bailout package. Although House members were adamant that the overall tax provisions remain revenue-neutral, the add-ons will cost taxpayers more than $100 billion, according to the Congressional Budget Office.

    Managers in the Senate said the energy provisions were needed to make the bailout more palatable to some Western members.

    Energy companies say oil prices that exceed $100 a barrel make extracting some of these nonconventional fossil fuels profitable.

    A recent report by the Air Force put the cost of building a coal gasification plant at $6 billion or more.

    “They are not going to build those because of the massive capital costs,” Slocum said. “This will encourage an industry where no one wants to invest — for a reason. The question is, should taxpayers’ money be used to shovel subsidies for coal?”

    Converting solid coal into a liquid transportation fuel, an industry that does not exist in the United States, could nearly double the global warming effects of the fuel and increase air and water pollution associated with coal mining, according to some scientific estimates. The bill extends production credits for coal gasification plants and includes the end product, aviation fuel, in the alternative fuel category.

    The coal investment credit will cost $389 million next year, the CBO said.

    Oil shale and tar sands processing are decades-old technologies that have endured drastic boom and bust cycles. Both involve heating sand and hard rock to draw out fossil fuels. Neither has reached commercial production in the United States. Processing oil shale, which is abundant in parts of Colorado, Wyoming and Utah, requires large amounts of water and energy to create a product that must then be refined.

    The bailout package includes a 50% tax write-off on refinery construction, which would assist the oil shale and tar sands industries.

    The next refinery expected to come on line is the Hyperion Resources Inc. plant in Elk Point, S.D., which would be the first built in the Untied States since 1976, excluding expansions. The facility, which could cost $10 billion, is intended to refine crude oil extracted from tar sands pits in Canada’s Alberta province.

    The breaks for refineries are expected to cost $72 million, but, said Bobby McEnaney of the Natural Resources Defense Council, “they are the best guesses from the Congressional Budget Office. There are no industries to use as an economic model.”