Apr 30 2006
Government the Greediest “Profiteer” from Oil Profits
That might be an overstatement, but not a massive one. Rich Noyes, over at NewsBusters has a piece summarizing how much the government gets from big oil profits — You know, the same government run by those in Congress who are vilifying the oil companies.
Observes Noyes correctly, “As for ExxonMobil, in 2005 the company reported paying just under $99 billion in taxes – $23.3 billion in income taxes, $30.7 billion in excise taxes, and $44.6 billion in “other taxes.” And yet politicians are preparing to extract still more in taxes from the big oil companies, as if those costs won’t ultimately be incurred by consumers.”
Again, the whole obsession with oil company dollar profits is a distraction from net profits as a percentage of sales. To quote our own study from a detailed piece on the opportunists in D.C. a few weeks ago:
- “Are the oil companies as greedy as Dick Durbin says? Certainly oil company profits in dollar terms are up. When the price of a product is driven up from $13 a barrel in 1998 to the $60 range, in the face of increased demand you can expect gross sales in dollar terms to rise. So when we look at Exxon Mobile’s gross revenue of 1996, at $134.2 billion and compare it to $204.5 billion in 2002, 2005’s gross revenue in simple dollar terms seems simply massive: $370 billion. Hence, politicians and greed pundits love to throw that number around to rile the masses into voting action.
Others like to use the term “record profits” to describe the situation. In 2005, that number for Exxon, after taxes and expenses is $36 billion compared to a mere $11 billion a few years earlier in 2002. Talk of record profits mixed with talk of greed — all on the backs of the consumer — is sure to resonate with stretched pocket books, never mind reality – after all, while certainly Durbin knows better, profits in companies in dollar terms are essentially meaningless. A more valid indicator of profitability is profit relative to sales in a percentage form, as well as to total operations.
When we look at profits in those terms, we can see that Exxon in 2005 had a net profit of about 9.75%: Hardly record breaking. Consider, for example, that McDonalds 2005 profits were 12.72%. Microsoft’s were 31%… and Halliburton’s 11.5%…and Verizon at 9.85%.
Where’s Dick Durbin breaking down the door of those companies and trotting their executives in front of the Cameras so he can grandstand for votes?”
Companies doing the scale of business Exxon is doing are inevitably bound to have larger profits by the simple fact that the commodity in which they deal has been going through the roof thanks to a host of reasons other than “greed”, although the latter is what appeals to the worst in voters who have grown to expect everything from Nanny Sam down in D.C.
We encourage readers to discount the demagoguerycoming from the vote-desperate lunatics running in the Asylum On The Potomac — and be leary of whatever knee-jerk, populist policies they might implement –, and instead focus on the host of reasons referred to in our article linked just above; you’ll come away with a better sense of what’s really going on in our economy, an by inference, be prepared to act vigilantly regarding your own finances.
