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Oil profits a frequent target, but they're hardly out of line
Topic Started: Jun 21 2016, 10:44 AM (352 Views)
Berton
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Oil profits a frequent target, but they're hardly out of line

THE Obama administration wants to raise taxes and fees on the oil and natural gas industry by more than $90 billion over the next decade. Similar tax-hiking proposals have been advocated even here in Oklahoma.

That such proposals are being touted in the midst of an oil bust is astounding. And, as a recent report by the American Petroleum Institute makes clear, energy companies already have relatively low profit margins while being among the nation's most heavily taxed industries.

“Energizing America: Facts for Addressing Energy Policy” highlights much information too often ignored by politicians. For one thing, oil and gas profits are hardly obscene.

From 2011 to 2015, API notes, earnings for the oil and natural gas industry have averaged about 4 cents for every dollar of sales. That's less than half the average of nearly 9 cents for all manufacturing.

But in 2015, the oil industry lost nearly 9 cents for every dollar of sales, while all manufacturing had earnings of almost 8 cents per dollar. And in the worst quarter of 2015, the average for the oil and gas industry plummeted to minus-21.9 cents on the dollar.

Put simply, there are no “excessive” profits in the business today, nor were prior profits out of line with other industries in the past.

What of taxes? From 2011 to 2015, API notes, income tax expenses (as a share of net income before income taxes) averaged 37 percent for the oil and gas industry. The average for other S&P Industrial companies (excluding oil and gas) was far lower — 25.8 percent.

Energy's higher tax burden is a function of logistical reality. The API report notes, “U.S.-based oil and gas companies must structure their operations and invest substantial capital where the resource is found rather than where the best tax regime is located.” Other industries have greater flexibility to locate operations in areas with lower tax rates.

The effective tax rate for biotechnology companies from 2010 to 2015 was only 19 percent. For pharmaceuticals, the rate was 20.5 percent. For aerospace and defense, the average was 28.9 percent. Only the health care and retail industries had effective tax rates similar to those paid by oil and gas producers, and even those rates were slightly lower.

A comparison of industry earnings also highlights how oil and gas producers aren't getting rich based on fat profit margins. While the industry's average earnings from 2011 to 2015 were 3.9 cents in net income per dollar of sales, computers generated 25.3 cents on the dollar. Apparel makers earned about 8.9 cents per dollar of sales, which is more than twice what oil and gas producers made. Even the food industry, which historically has tight margins due to the challenges associated with selling a perishable product, had earnings of 4.8 cents per dollar.

Should the Oklahoma groups that advocate for higher energy taxes also call for raising taxes on computer sales, prescription drugs, and grocery stores and restaurants? The question answers itself: of course not. Similarly, aerospace and defense are big employers in Oklahoma. Yet you don't hear anyone calling for raising taxes on those companies (and rightfully so).

The API report makes clear that the call to increase taxes on oil producers isn't driven by any serious economic analysis, but instead by politically motivated
malice.


LINK


We have people like Brewster who put out similar charts showing total earnings or profits of the very large oil and gas industry and compare them to much smaller industries. They also had charts like Brewster likes to post showing tax subsidies(tax breaks like every industry gets), again comparing total dollar amounts to much smaller industries like the green energy industry. Sadly many people think charts like that actually tell them something meaningful. The truth is not what they want people to see.

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Brewster
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Berton
Jun 21 2016, 10:44 AM
The truth is not what they want people to see.

And certainly you don't want to see it, do you?

You measure profits an a percentage of sales - that's a phony measure, as you should know. Wal-mart has a very low profit margin, (usually about 2.8%) but they sell so much they're one of the richest families in the world - and they don't get direct subsidies to add to their bottom line!

How about as a percentage of money invested - and make sure you count the money made on tax breaks, idle leases and subsidies.

As an aside - I'm sorry, Berton but I really don't think you'll even see a single crumb of the obscene profits of the Kochs and their oil buddies, no matter how often you shill for them.
Edited by Brewster, Jun 21 2016, 12:09 PM.
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Berton
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As I thought, Brewster in his progressive filled hate for the US can't see the truth when it hits them in the face.

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Stoned
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Can anyone here think of any other industry that changes retail prices twice a day, with all the prices coming out within one cent?

Hmmmmm. What was the definiion of "cartel" again?
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Brewster
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That's something that has always mystified me - it applies right down to the little independent gas bar down the street from us - he always charges one cent less than the Big Guys - ALWAYS - how does he know ahead of time what they'll be charging today?
Edited by Brewster, Jun 21 2016, 11:50 PM.
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Thumper
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One of our local stations told me that the guy that delivers the gas instructs them what to charge. Lol. Why they charge at the xxx.9 rate is comical. Wonder who they think they are fooling, themselves?
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Stoned
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Brewster
Jun 21 2016, 11:49 PM
That's something that has always mystified me - it applies right down to the little independent gas bar down the street from us - he always charges one cent less than the Big Guys - ALWAYS - how does he know ahead of time what they'll be charging today?
Having read thisI I am still not sure if the prices are set by the company or the commodities market. I hate to think of what would happen if the price of other products were chraged to their stock prices.............daily. (or hourly ?)

Whether the gas at the Plainfield BP was made from a barrel of oil pumped a month ago 1,000 miles away in Williston, N.D., or three months ago and 7,000 miles away in Kuwait, its price is set by buyers and sellers in New York hours before Ricker buys it.


http://www.har.com/blog_16964_who-decides-the-price-at-the-pump-gas-prices-are-about-more-than-just-oil
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Thumper
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Several stores I've shopped at have electronically displayed prices. These prices can change hourly depending on the input of competitive pricing data.
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colo_crawdad
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Brew,

Prepare to be
Neutralized by Berton.
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Stoned
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Thumper
Jun 22 2016, 12:22 AM
Several stores I've shopped at have electronically displayed prices. These prices can change hourly depending on the input of competitive pricing data.
Hourly? Ours tend to change in the morning and early after noon. Guess they have to catch that rush hour traffic.

Can you tell me what this has to do with supply and demand, or cost of production, or anything that might relate to actual cost of supply and procuction?

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