$5.00 per gallon gas strategy

[bmcdonau]

The Congressional Research Service states the oil industry in the United States first received government assistance in 1916. That was when intangible drilling costs were able to be fully deducted from a company's expenses for tax purposes. In 1926, a write-off for cost depletion was introduced. That provision allowed oil companies to deduct costs based upon overall gross receipts and not just the actual value of the oil.


Both of those subsidies still exist. The Obama administration claims the average subsidy for huge oil companies is $4 billion per year. The bill in the Senate would have saved $24 billion in 10 years. The White House claims when gas goes up one cent per gallon, oil companies make $200 million more per month.

The American Chemical Society cites a report by Double Bottom Line Venture Capital that explains how the oil industry has reaped benefits from subsidies. From 1918 to 2009, the average annual subsidy was $4.86 billion.

When the study is adjusted for inflation to 2009 dollars, the oil and gas industry received subsidies amounting to $1.8 billion per year in the first 15 years of the fledgling industry. The American Coalition for Ethanol estimates that when combined with state and local government aid to large oil companies, subsidies amount to anywhere from $133.8 billion to $280.8 billion annually from all sources of taxpayer aid that goes to the oil and gas industry.

 

[Diderich]

Either tax them or remove all subsidies. The oil companies are making an obscene amount of money. Why should they receive any subsidy at all?

How much are they making?

 

[STman]

How much are they making?

ExxonMobil alone made 41 billion last year and paid 17% in taxes.

Article here.

 

[jqueen]

ExxonMobil alone made 41 billion last year and paid 17% in taxes.

Article here.

And what was that as a percent of revenue? The only revenue # I found was 486.429 billion. That works out to 8.44% net income. Most of the management team at my company would be fired if net income was that low in 2011.

 

[SL350]

The Congressional Research Service states the oil industry in the United States first received government assistance in 1916. That was when intangible drilling costs were able to be fully deducted from a company's expenses for tax purposes. In 1926, a write-off for cost depletion was introduced. That provision allowed oil companies to deduct costs based upon overall gross receipts and not just the actual value of the oil.


Both of those subsidies still exist.

I still don't have a clue what intangible drilling costs are or cost depletion. If they are legit costs, where is the meat of the oil company tax cheating?

Even with this, it does not sound like what I would term a subsidy. A subsidy to me is cash for clunkers. If it is just eliminating a deduction, then that is no different than changing the tax rate.

 

[Ben Eberle]

ExxonMobil alone made 41 billion last year and paid 17% in taxes.

Article here.

Don't all the stockholders whom that profit is distributed to have to pay personal income tax on that money? Don't the employees and executives of ExxonMobil have to pay personal income taxes on their wages and saleries?
Isn't corporate income tax a form of double taxation?

Aren't the Obamas living large at huge government expense? Martha's Vinyard, Hawaii, Spain, Vail, shutting down Manhatten at huge costs for a "date night", why no outrage in the press?

 

[YoDoc]

I think profit is after expenses like payroll.

If corporate taxes are double taxation, so is sales tax, or any almost any tax levied on almost anything.

Stock holders aren't paying personal income tax, they pay capital gains taxes, right?

Perhaps nobody is flipping out on the Obama's costs to taxpayers because it's not much compared to other things like Medicare and such. Also because those are things we expect from a president.

Did you know George Washington rode in a carriage pulled by four white horses draped with leopard skins? That doesn't have much to do with anything, I just think it's neat.

 

[Crew Chief]

Either tax them or remove all subsidies. The oil companies are making an obscene amount of money. Why should they receive any subsidy at all?

I'm curious, just what do you think happens to those "obscene profits''?

 

[Ben Eberle]

Stock holders aren't paying personal income tax, they pay capital gains taxes, right?

Right, and the reason the tax rate on capital gains is lower than income tax is because that income has already been taxed before they recieve it.

If you want investment income to be taxed just like regular income, then we need to eliminate corporate income tax. That way the widow who relies on her ExxonMobil stock for her meager pension would get more money from those stocks while the billionaires who's entire income is from investments would have to "pay their share".

 

[Ben Eberle]

Perhaps nobody is flipping out on the Obama's costs to taxpayers because it's not much compared to other things like Medicare and such. Also because those are things we expect from a president.

Did you know George Washington rode in a carriage pulled by four white horses draped with leopard skins? That doesn't have much to do with anything, I just think it's neat.

Yes, but I can't remember a POTUS who demonizes the rich like Obama does, while he and his family set new records for living like a rock stars. The hypocrisy of the Obamas and their sychophants sicken me.

 

[SL350]

I think stocks bought and sold within a year are treated just like income (or loss). It is when you hold them for years and then sell, during the year of the sale it is a capital gain. It is using the tax code to inspire long term investment.

So it depends on how long you hold the investment whether it is capital gains or not.

 

[SL350]

I looked up the "intangible Drilling Costs on the internet", and they are anything but a subsidy. Check out the definition and decide if you think this is a subsidy and what taking it away might do to US oil:

http://www.investopedia.com/terms/i/intangible-drilling-costs.asp#axzz1qblrtLQz

Definition of 'Intangible Drilling Costs - IDC'
Costs to develop an oil or gas well for the elements that are not a part of the final operating well. Intangible drilling costs (IDCs) include all expenses made by an operator incidental to and necessary in the drilling and preparation of wells for the production of oil and gas, such as survey work, ground clearing, drainage, wages, fuel, repairs, supplies and so on. Broadly speaking, expenditures are classified as IDCs if they have no salvage value. Since IDCs include all real and actual expenses except for the drilling equipment, the word "intangible" is something of a misnomer.

Edit: Why did we have to figure this out here? Where the heck is the media who should investigate? We are on our own to sift through and find the truth.

 

[STman]

Don't all the stockholders whom that profit is distributed to have to pay personal income tax on that money? Don't the employees and executives of ExxonMobil have to pay personal income taxes on their wages and saleries?
Isn't corporate income tax a form of double taxation?

Yeah, I had this discussion before with someone else here, maybe Tracker. It depends on what the income falls under. Capital gains is what, 15%? So, the corporate tax is picking up the slack of what is lost due to the capital gains rate. It's not my area so not sure. The corporate tax rate is not so much the issue as the subsidy. If it is in fact a subsidy and not just a reduction in taxes. People keep playing with words to support their point so it's hard to get to the truth.

Aren't the Obamas living large at huge government expense? Martha's Vinyard, Hawaii, Spain, Vail, shutting down Manhatten at huge costs for a "date night", why no outrage in the press?

Absolutely. I wouldn't say Obama has been any worse than the rest but yes, I would agree. Part of the problem is tighter security for Obama since threats are much higher than they were under Bush. The secret service must be doing a pretty good job too. Considering all the hatred toward the man, I'm very surprised there hasn't been an attack.

Did you guys read about what's going on in the UK regarding fuel prices there? 139 pence per litre I believe, which comes to about $2.20 for just shy of a quart.

 

[Red Brown]

Romans, countrymen, lend me your ears...

A majority of the price paid for a gallon of gasoline that you and I pay for comes directly from the wholesale price of crude oil, which is refined to make gasoline and other petroleum products.

As we all know, crude oil is a globally-traded commodity. On net, the United States imports 45 percent of the crude oil it consumes. Even individual investors can buy not only oil stocks but ETF's that mimic the price of crude oil, so if you want to benefit from the higher prices, you guys might consider such investment products.

GLOBAL Oil demand - World crude oil and liquid fuels consumption grew to the highest level ever in 2011, with an estimated 87.9 million barrels per day (bpd) consumed in total. The Energy Information Administration (EIA) projects that total world oil consumption will grow by 1.3 million bpd during 2012 and 1.5 million bpd in 2013 with countries outside the Organization for Economic Cooperation and Development (OECD) comprising most of the growth in consumption.

Now with regards to what specfic US policies might impact gasoline prices...one can point to U.S. Monetary Policy i.w. weakening the Dollar – In 2008, commodity prices (like food and fuel like we have discussed before) surged with the initial Federal Reserve interest rate cuts and increase in the monetary supply. This increase is precipitated by investors choosing to secure their finances with non-income generating real assets, like oil and precious metals, in the face of inflation and a devalued dollar. QE1234 also helped a bit too...

Let's not forget taxes which is a whopping 48 percent or so of gallon of gas.

The third cost to factor into the price of gasoline is the refining process, where crude oil is “cracked” and formulated into its chemical components and made into gasoline. In January 2012, refinery costs comprised 6 percent of the retail price of gasoline.

So really, the Iran factor - geopolitical risk and just plain increased demand, especially from emerging markets is a the biggest factor in the rise of crude. Those that think that by magically replacing Obama, we will have a significant respite from high gasoline prices are in a state of delusion. The only real adjustment might be gasoline taxes I mentioned, I don't know how they can be reduced without impacting the revenue raising function they serve.

Remember Newt Gingrich said recently if elected, he would make gasoline prices would drop the to the mid 2.00's. Does anyone believe that?



Chunky Monkey

RB

 

[SL350]

That doesn't make the Obama double speak OK. Him wailing away at the big oil just angers people and the effect of dis-allowing legitimate drilling expenses reduces our domestic production right at the time when we need more to cap the upward pressure on crude prices. Shame on him.

 

[Tracker]

because we are depending on foreign oil, that does impact the costs of crude. Imagine the impact of the middle east on us if we didn't get any oil from them? (that would assume some export tariff to keep domestic oil from flowing overseas)

 

[YoDoc]

Suppose we double US production over night.

How would that affect local prices?

We know that oil is global, so there's no reason to assume that US oil would cost less in the US is there? How much of that cost is shipping? How much of the world market's oil does the US produce?

 

[wanabeguru]

I'm kinda thinkin' the people in the trenches are the one's getting screwed.

 

[Tracker]

hence my caveat about export tariff.

 

[STman]

I'm kinda thinkin' the people in the trenches are the one's getting screwed.

It's always been that way and my guess is always will be. The best solution is to drastically cut back consumption. I'm glad that I don't add much to the oil company coffers.

 

[SL350]

It's always been that way and my guess is always will be. The best solution is to drastically cut back consumption. I'm glad that I don't add much to the oil company coffers.

Same here. I add that imported oil $$$ funds bad things.

In the race to consume less, I think this time it is different. We don't see a waiting list for econo cars, rusted Geo Metros selling for almost $10K, or even greater demand on used bikes - not even small cc bikes.

Sooner or later these forces have got to put downward pressure on gas prices. It is just a matter of time.

 

[YoDoc]

Same here. I add that imported oil $$$ funds bad things.

In the race to consume less, I think this time it is different. We don't see a waiting list for econo cars, rusted Geo Metros selling for almost $10K, or even greater demand on used bikes - not even small cc bikes.

Sooner or later these forces have got to put downward pressure on gas prices. It is just a matter of time.

Downward pressure here is being overcome by upward pressure from other countries. Even if all the cars in China get a million mpg, they're putting how many new cars on the road every year? A million?

 

[SL350]

China is growing but just look at us, we were selling 15M cars here a year, that is 10M in the new post recovery world. We are still the "crowned king" of consumption. Our GDP is that of all the EU combined. China is growing but nowhere near the size of the US GDP.

We are still the big boys and when we reduce consumption as much as we have (14 year low), it creates worldwide tremors.

What does this have to do with gas? Keep doing what we are doing and that puts downward pressure on price. But as RB points out, there are other factors like inflationary money policies that are pushing against us.

When Obama's new CAFE standards come into effect, I wonder what kind of vehicles will be on the new car lots? Not even a clean diesel Tacoma is close to the cafe numbers - are trucks dead?

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

 

[T.R.]

Part of the problem is tighter security for Obama since threats are much higher than they were under Bush.

Is there new information on this? I'm not saying you're wrong but all the information I just found was the same stuff I found over a year ago when a friend told me the same thing. At that time it was something a guy wrote in a book and the secret service denied it. Here's a link with a video where the head of the secret service is testifying before Congress.

http://www.politico.com/blogs/glenn...Obama_no_greater_than_under_Bush_Clinton.html

 

[Soly]

When Obama's new CAFE standards come into effect, I wonder what kind of vehicles will be on the new car lots? Not even a clean diesel Tacoma is close to the cafe numbers - are trucks dead?

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

Snagged this from Wikipedia

Starting in 2011 the CAFE standards are newly expressed as mathematical functions depending on vehicle "footprint", a measure of vehicle size determined by multiplying the vehicle’s wheelbase by its average track width. CAFE footprint requirements are set up such that a vehicle with a bigger footprint has a lower fuel economy requirement than a vehicle with a smaller footprint. For example, the 2012 Honda Fit with a footprint of 40 sq ft (3.7 m2) must achieve fuel economy (as measured for CAFE) of 36 miles per US gallon (6.5 l/100 km), equivalent to a published fuel economy of 27 miles per US gallon (8.7 l/100 km), while a Ford F-150 with its footprint of 65–75 sq ft (6.0–7.0 m2) must achieve CAFE fuel economy of 22 miles per US gallon (11 l/100 km), i.e., 17 miles per US gallon (14 l/100 km) published.

CAFE has separate standards for "passenger cars" and "light trucks", despite the majority of "light trucks" actually being used as passenger cars. The market share of "light trucks" grew steadily from 9.7% in 1979 to 47% in 2001 and remained in 50% numbers up to 2011. More than 500,000 vehicles in the 1999 model year exceeded the 8,500 lb (3,900 kg) GVWR cutoff and were thus omitted from CAFE calculations.

Here is the link to the whole article if anyone is interested.