President Bush’s response to $103-a-barrel oil and $3.15-a-gallon gas has been to call for more U.S. drilling and, as he did Tuesday after meeting with Jordan’s King Abdullah II, to urge OPEC to pump more oil. But the New York Times editorial board — frustrated with the Senate’s Bush-sanctioned refusal to offset tax credits for wind, solar and other renewable fuels by eliminating equal credits for oil and gas producers — reminded Bush of something he said just three years ago: “I will tell you with $55 oil we don’t need incentives to the oil and gas companies to explore. There are plenty of incentives. What we need is to put a strategy in place that will help this country over time become less dependent.†Then the Times asked: “If that was true at $55 a barrel, why isn’t it even more valid and urgent at $100 a barrel?â€
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71 Comments
Because Republicans are lying liars…that’s why.
Someday, feeing Iraq will lower our oil prices.
Operation
Iraqi
Liberation
sorry, FREEING
It’s no longer true because the election is over! I told my brother 3 yrs. ago we’d see 100$p.b. oil before bush left office. He thought I was nuts.
Again, it all goes back to the Senate where the obstructionist have no problem fillibustering, and an override of bush oil addiction policies is impossible. Bet our Senators were right onboard.
Oil at least at this point is essential to both National defense and the well-being of the country.
But it is not a license to have undo tax breaks and favorable treatment to the extent that the Oil Companies do not face any losses. Even though it is essential, it is still a business that is in the business of making a profits. They do not do it out of the goodness of their heart or in the interest of the nation.
Oil is where it’s at because of speculators, pure and simple. There is no shortage of oil to meet demands . The laws of supply and demand have been supplanted by the ability to manipulate the market through control of exploration, drilling, refining a distribution. There is no competiton in the real sense any more.
Maybe it is time to do a little rumbling about nationalizing the oil companies…
We need MORE tax breaks for the rich and for Corporate America! What’s good for corporations and oil companies is good for America. Anything else is just unpatriotic.
“I told my brother 3 yrs. ago we’d see 100$p.b. oil before bush left office.”
It will be $200 in 4 years no matter who of the top three is president from what I can tell. Congress and the President (whomever they may be) can protest and beg all they want for oil companies to lower gas prices and for OPEC to increase production, but it won’t help.
We have to get past the idea that oil is cheap and will settle back down to $55 per barrel like a good dog. Which is way we need to STOP building roads and we need to allow higher energy efficient transportation infrastructure like railroads to become more profitable. Enacting zoning laws that encourage more compact communities should be done as well.
Renewables do NOT compete with oil since they are largely NOT a fuel for transportation.
I blame our higher prices on the politicians and environmentists over a period of years, Not you can’t drill here or there we might hurt something or someone. This did not happen over night. We our letting foreign countries control our resources and that is not good. You can’t take away from the so called rich and profit making corporations and give to somebody else, I don’t think that works. I’m always suspect of anything that the NYT writes anyway.
sursum: Oil is where it’s at due to the invasion of Iraq by the Bush administration.
Exxon-Mobile posted world record profits last year. I think they are done with their tax breaks.
There is no shortage of oil nor gasoline. The oil companies are having a hard time finding places to store the gasoline. Supply and demand would dictate a drop in the prices.
I hope oil DOES go to $200 a barrel…only when it gets too expensive for the average American will we get serious about alternatives. If we can get over our dependancy on oil, that will free us in so many ways. I predict in the next 10 years, the vehicles on our highways are going to look completely different and we’ll have a lot more mass transit, less pollution, and no need to invade other countries for their oil.
“The Senate Shills for Big Oil”
This is the actual headline from the NYT. The Congress, which last time I checked is Democrat controlled, failed to pass tax credits for alternative energy development with the EXCUSE that they needed to cut tax credits for oil and gas producers to pay for it. But they didn’t have the will to do that. So, at a time when we are getting held up by high energy prices and when we most need to find more oil and alternative energy sources, the Democrats in Congress can’t pass gas.
But to Rhonda, that is apparently the president’s fault.
Damn good idea, JR.
It’s our oil after all.
Don’t worry, neo-capitalists, the oil companies will get a “fair market value” for their assests.
Just like the people in Texas did when Bush seized their property for the arena he built . . .
Damn right Capn. That’s what i did. Viva la socialism! Down with America! Follow me!
Are you kidding? There is NO fiscal problem that cant be solved with more tax cuts for big business and big money!
At least get rid of the millions of dollars in taxpayer corprate welfare Oil companies get. And lets rembember a good percent off the price of gas is taxes.
I know for sure the “erl bidness” as we say in Texas, is BOOMING.
The biggest problem for the geophysics companies in Houston? You guessed it.
A shortage of qualified workers…
Could anyone please point me to where these subsidies are defined? All I could quickly find was how bad they were, and where we needed to use tax subsidies instead.
My take is tax credits should not be allowed, period. Normal cost of doing business deductions, of course. No “targetted” deductions or worse yet, credits.
Of course oil companies have record profits!! The price of oil has skyrocketed because of the weak dollar caused by massive government overspending and the credit crunch. Investors are looking for commodities to invest in, hence the record prices for oil and gold. Therefore the higher the price for oil the more money that is brought in and profits increase. But the liberal politicians and media want to take away their profits. Yet no one talks about profit margin, the real measure of profit; oil companies’ margins have remained the same. No one talks about the far higher profit margins of other business, its all a bunch of pandering to the government educated masses.
One indirect subisdy oil companies get is whenever they damage the enviroment the government cleans up the mess for them(Exxon Valdez)
http://www.cato.org/pub_display.php?pub_id=7066
http://archive.greenpeace.org/climate/oil/fdsub.html
Another indirect subsidy is the government sponsored highway construction projects. Better taxpayer funded roads, more driving, more customers for Exxon.
I still need links to the direct subsidies. Indirect subsidy cases can be made for and against just about anyone.
Google oil subsidies and look. I Did and posted two links
Not sure lj. I don’t believe there are any direct subsidies to the oil industry in the manner that is being implied. I think they are called incentives which means it is difficult to put a dollar amount on it. I know there are loopholes and other writeoffs related to how taxes are levied which somehow incentivizes the oil industry to do more exploring.
It would have been nice for the WEBlog to include such information so that we can discuss firm details.
LJ, your request for direct links to subsidies is facially reasonable. It, unfortunately, is not that simple.
I’m not an oil and gas tax person. Thus, without expending a lot of time in research, there is no way to give you a list. I would refer you to the provisions of the Internal Revenue Code dealing with the handling of IDCs (Intangible Drilling Costs); ICCs (Intangible Completion Costs); the tax credit available for certain “tight formation” wells; the provisions of subpart F of the Code dealing with the credit for foreign taxes paid, and some specific language within one of the sections of subpart F on the timing of recognition of foreign source income in oil and gas; there are many, many more.
There are many provisions, of course, that affect all corporations, not just oil companies, which are favorable. Oil companies do have many provisions specifically addressing their business contained within the Code.
I’ll restate another non-income tax related area where the oil companies have benefited; the drilling on government land with the requirement to pay royalties on production gained thereby cited by CapnA (IIRC, he provided a link to this on more than one occasion) waived by the current Administration.
Sorry, LJ, as much as I would like to respond to your request in a more direct way, I’ve not three or four days to do the research.
Capn and JR
You guys a just effing geniuses!!!
Nationalize the oil industry!!!!
You both are STUPID STUPID STUPID!!!
Think a little. Let me help you.
How much does the Federal govt. make off of the oil companies in the form of corporate income tax?
How much does the Federal govt. make off of the oil companies in the form of retail taxes at the pump?
Now let that sink in for a minute….and they do that without risking a dime.
The taxes the Feds take are more than the oil companies profits on a gallon of gas……..without spending or risking a dime.
Is it sinking in yet????????????????????
Now imagine some govt. bureaucrat running the oil industry. Running the exploration, the drilling, the refining, the distribution. What a stinking disaster that would be. YOU would LOSE money on that deal.
THINK ABOUT IT!!!
“rfl” parses –
“I don’t believe there are any direct subsidies to the oil industry in the manner that is being implied. I think they are called incentives…”
“A rose by anyother name…”
Of course oil companies have record profits!!
Don’t forget that the u.s. produces 40 percent of its oil, and this oil costs scarecely more than it has in the past. The Hummer’s per capita capitol of the world is Russell Kansas.
After Boeing was rejected for the tanker deal Tiahrt went ahead and voted against removing the tax subsidies for the top five oil companies. The billions of dollars would have went to clean energy meaning millions of dollars in investment in Kansas.
Tiahrt’s incompetence continues to screw over the Kansas people. His only interests are doing what he thinks is best for his corporate campaign donors.
Doug
Explain these tax subsidies.
Vaughn Tolle-
Thanks. I don;t really have 3 or four days either, which is why I asked. I figured somebody on this board would know, or would have a link defining, the evil tax subsidies That that been voted to be eliminated in the House, but rejected by the Senate.
With all the wailing and gnashing of teeth, it would be nice to know just exactly what I should be upset about. Another than the nature of “tax credits” in general.
rfl and Heckler are correct; the tax incentives provided by the Code are not subsidies, that is, there is no direct transfer of money from the Treasury to the oil companies. Rather, the provisions at issue merely provide that money that would otherwise be transferred to the Treasury by the companies are retained by the companies. It may well be of the same effect, but the incentives are not subsidies.
Incentives exist in the Code to encourage a number of behaviors felt important by the Congress from time to time. I do not want to get into the philosophical discussion of whether the Code should be used as a blunt instrument to enforce policy decisions; that is for another time and another thread, perhaps. At the individual level, there are several incentives provided; the most obvious is the home mortgage interest deduction (encourages home ownership, while benefiting mortgage lenders and home builders). Another is the deduction for charitable contributions. The EIC, in theory, is to encourage going to work, even at lower paying jobs, and thereby removing some incentive to refuse to work at such jobs and receive “welfare”.
The Kennedy tax reforms in the early 1960s, with the provision of accelerated depreciation and the Investment Tax Credit, were designed to encourage businesses to purchase new equipment, in an attempt to push the national economy forward from the doldrums of the middle to late 1950s, increasing productivity and, I believe, in the hope that employers would hire additional employees. The cut in the maximum marginal tax rate that then occurred was to encourage more income be earned. Similarly, the “special treatment” afforded the oil and gas industry is designed to encourage additional exploration and development. The foreign tax provisions in the Code go to use of private corporations to further a desired governmental policy of encouraging economic development in other countries, and to create markets for U.S. goods.
There are multiple additional examples throughout the Code. Whether they should exist is, again, a discussion for another time and thread. The “incentives” provided the oil companies are merely one example of the same, one which attracts much attention at the present due to rising fuel costs, and the profits of oil companies in gross dollars, regardless of the “margin”.
http://www.citizen.org/cmep/energy_enviro_nuclear/electricity/energybill/2005/articles.cfm?ID=13980
Thomas Paine-
Thank you. Though filled with editorializing, this link appears to have a great amount of information gathered in one place. It gives me a great starting point. Again, thanks
I’m generally against any kind of corporate welfare as profitable business should be able to make it on it’s own.
It is time to allow drilling in ANWAR and off the coast of Florida and such. It is time the politicians stopped being part of the problem.
It was not a lack of will by congress but a lack of votes which would be needed to overturn a veto by bush. The obstructionist have to be removed before change is possible.
“Now imagine some govt. bureaucrat running the oil industry.”
Isn’t the government the solution for everything? Just like having government handle healthcare.
Isn’t that the ultimate utopia?
Progress on the war for oil. Iraqi officials have announced that foreign oil companies will now be paid in oil for the honor of drilling for oil in Iraq. Previously the Iraqi government would drill for oil and sell that oil on the market. However, now that Iraq has gained it’s independence it has decided to give that oil away for free to the British and American companies which occupy Iraqi soil with the protection of American and British soldiers.
Finally, the oppressed Iraqi oil will find a safe home in America. I’m so proud, I think I’ll go wear a flag lapel pin and salute the next SUV I see for helping bring those oil barrels home.
Now if we could just get war reparations, oil would be dirt cheap for decades!
You hate “corporate welfare”?
Scrap the income tax and go to the Fair Tax.(national retail sails tax)
Um, this would be the same oil that cheney and rummy said would pay for the war? You know, so the war didnt cost the taxpayers anything?
That oil? And now it’s going to the oil companies, not the iraqi or u.s. governments to pay for the war?
Color me surprised. Socialize the costs, privatize the profits.
No WONDER cheney wanted to keep the energy task force meetings secret.
And where is ken lay?
Farmgirl, don’t you know that they rolled out the red carpet for our esteemed President and greeted him with flowers. Oh wait, that was the Iranian President. When Bush arrived he did so at night, in secret. Bush would love to have a 19% approval rating in Iraq.
We have outsourced our oil production and refining process to other countries.
Remember when Boeing announced it was going to build parts of airplanes in China?
sooner or later the bill comese to the American taxpayer or the American consumer.
Ken Lay is on the links with Osama right now. Osama is up by 3 strokes.
Boeing workers have known for yrs. that if Boeing kept outsourcing technology to China, they would eventually just build their own.
Management is Way overpaid considering their short sightedness.
But, but, but Phantom: how else could Boeing get into the market in China? Geez, think of the increased sales and higher dividends. Long term? Hey, we’re only worried about the next quarter. /sarcasm
When China quits buying boeing and building their own, our trade imbalance with them is going to mushroom.
I still gotta say oil pricing is manipulation and perhaps the Iraq invasion has probably created a permissive enviornment to manipulate. Oil spiked under Carter during the Iran Hostage crisis when tankers were sitting off shore waiting for prices to rise on the commodities exchange, prior to docking. I remember ABC showing a bunch of tankers doing just that and was astounded that we put up with it!
I still gotta say oil pricing is manipulation and perhaps the Iraq invasion has probably created a permissive enviornment to manipulate. Oil spiked under Carter during the Iran Hostage crisis when tankers were sitting off shore waiting for prices to rise on the commodities exchange, prior to docking. I remember ABC showing a bunch of tankers doing just that and was astounded that we put up with it!
Good point and quite observant sursum.
VT
I know that most investors in “drilling programs” expect an immediate “write off” of, roughly, 80% to 90% of the amount invested. This is the IDC that you speak of.
That seems fair, to me, in that many wells are “dry holes” and produce NOTHING.
Then, there are “Depletion Allowances” that, in a good program, amount to roughly 20% to 30% of cash flow.
Again, this is not a “payment” by the government, to to the drilling program or production company.
A business loss is a loss.
I do not deal in these programs, currently, but I have friends and family who are very involved.
$100,000.00 invested might generate an 85% or $85,000.00 “write off” of IDC.
Even after the write off, this deal is upside down.
The government just allowed someone in the 35% Federal tax braket a tax savings of, roughly, $29,750.00.
If this is a “dry hole” the investor just traded $100K for less than $30K.
Obviously, this calls for “diversification” and spreading the risks between many wells, and many investors.
This, however, reduces returns when a well is successful, since that revenue will be used to offset the losses of the non-producing wells.
—–
The oil companies generate $Billions in tax revenues, for Federal, State and Local purposes.
It is Ethanol that actually gets a “subsidy” —
What happened to all that “free market” talk?
I guess it doesn’t apply to oil companies.
Sursam
Do you own a house or realestate?
When you try to sell it at the best price, are you a “speculator”?
When you bought your house, did you try to buy it at the best price, for YOU?
Did that make you a “speculator”?
The way to deal with “speculation” is to encourage massive production.
—–
By the way, I went to college with a bunch of guys that went into petroleum geology.
That was back in the 80’s.
None of them could find a job, at graduation. Not in that field, anyway.
Petroleum production is a very, very risky business.
Those of you who think it is “easy” are free to put your own money into it, you know?
By the way, we ALL benefit from the profits of Petroleum companies.
They pay huge amounts of tax revenue, and every pension plan in America, every college trust department, most charitable endowments, OWN OIL STOCKS!
WS
Tax incentives are a rational way for the government to encourage free market solutions.
Tax liability is based on profits.
Business investment is usually amortized over several years, depreciated, but not written off all at once.
In the oil business, this would not be fair.
It would reduce employment and tie up capital costs, artificially, for several years, on a well that might not even produce.
Again, if you liberals think that this stuff is “easy” there are any number of avenues you can use, to “get in on the action” —
However, even with ALL the tax treatment “advantages” available, to oil and energy investors, you will find that average returns are, roughly, the same as they are for any diversified mutual fund, over a 10 year period.
“Tax incentives are a rational way for the government to encourage free market solutions.”
If it is a free market, why do they need to be encouraged?
WS
If it was TRULY a “free market” we would not have some of the highest corporate tax rates in the world!
“If it was TRULY a “free market” we would not have some of the highest corporate tax rates in the world!”
Really? Then who would finance foreign policy misadventures for George W Bush – just the average working Joe or Jill?
How convenient.
Econ101 posted March 6, 2008 at 8:05 pm
“Petroleum production is a very, very risky business.”
Higher energy efficiency is guaranteed, and it takes an investment of only about $15 to save each barrel.
So invest $15 to save a barrel… or pay $100 to buy it, and burn it, and add more GHG’s to Earth’s atmosphere?
cosmos
Why is it always “either – or” with you?
Why not produce more AND conserve?
Also, many of the tax breaks for oil exploration go to small producers.
In fact, most of the production in Kansas is dominated by small producers.
The tax code is justified, when it comes to oil production.
You ought to at least consider the possibility that “peak oil” is here. The science is reasonable, the mathematics are sound. Why invoke conspiracy when a perfectly reasonable natural explanation exists?
Actually, “peak oil” is baloney.
We have more than enough oil to last for several more decades.
It is simply more expensive to produce, or it is “off limits” due to political concerns.
econ101 posted March 6, 2008 at 10:40 pm
“Why not produce more AND conserve?”
econ101 posted March 7, 2008 at 11:27 am
We have more than enough oil to last for several more decades.
It is simply more expensive to produce, or it is “off limits” due to political concerns.”
Thank you for answering your own question.
Cosmos
The idea of the “peak oil” folks is that oil will “run out” — and that will not happen in our life times.
“The idea of the “peak oil” folks is that oil will “run out” — and that will not happen in our life times.”
Uh yeah.
The US has not been able to domestically fill its oil needs for almost 40 years now. SO we have to fight the occasional war or topple a government here or there.
Time to get past oil.
But I guess paulie should be given some credit for dialing it back.
He’s the same poster that once said we would be dependent on oil….forever.
Speaking of King Abdullah, did you see that M. Thomas Eisenstadt wrote about him and Asst. Sec. of State Thomas Callahan in today’s blog? Turns out they may have been frat buddies at Dartmouth. It might explain a few things….http://www.eisenstadtgroup.com/2008/03/07/animal-house-and-the-king-how-the-plagiarism-scandal-leads-to-very-strange-places/
Get past oil?
Windmills dont power cars.
Solar power doesnt work for cars.
Yes, we depend on oil.
Yes, we will depend on oil for a very long time.
So, lets produce more of it!
The only ways to bring down the price are to increase the supply or reduce the demand.
(Or, perhaps, to cut the sales and excise taxes on the gasoline)
Econ101: Yep I own a house but I cannot control or manipulate the price of real estate in my area, I cannot get subsidies to cover the cost of me looking for a new house, the commission I have to pay an agent, to decorate it or pay me the difference if my house does not sell a price I want. I cannot demand and get all the other houses in my area to raise their prices to meet what I want therefore able to disguise my transaction and wimdfall profits as fair market value results. That is what cartels and uber capitalism does, it’s called anything but a free market, it’s called graft, corruption at high levels and specutlative profit taking.
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bad credit home mobile mortgage…
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I wonder how many of these facts you have really checked your self….
Carpets & Rugs…
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