OIL BASHING, ROUND TWO
February 1, 2006
Exxon is blitzing the media with ads playing down its record 2005 profit of $36.1 billion. The last time Big Oil reported earnings, industry executives were paraded before the Senate, grilled about high fuel prices and threatened with special taxes -- so the reverse PR blitz is understandable, says the Wall Street Journal.
Of course, Exxon is guilty only of responding to a market need, and its earnings are nothing to apologize for. As a nation, we want energy companies investing in increased production, and Exxon and others currently have the wherewithal to undertake those investments. The worst thing for the economy right now would be to have American oil companies in no better shape than Ford or GM.
According to the Journal:
- Today's high energy prices reflect strong demand from almost every major oil-consuming nation, including India and China.
- They also reflect political uncertainty in some major oil-producing countries, notably Iraq, Iran and Nigeria.
The worst way to respond to such uncertainty is by robbing the profits that energy companies need to diversify global oil supplies. Unfortunately, that's exactly what the politicians are up to, says the Journal. A backdoor windfall profits levy, which would raise taxes on oil companies by changing the way inventory is valued, has already passed the Senate. This is especially insidious because it is an after-the-fact raid on profits already earned by the company under current law.
These large oil concerns are already subject to a 35 percent corporate income tax rate, and record profits mean commensurate tax payments to the federal Treasury. But if Congress can suddenly pass a law confiscating the past profits of companies on a whim, we aren't all that far from Russian President Putin and Yukos, says the Journal.
Source: Editorial, "Oil Bashing, Round Two," Wall Street Journal, February 1, 2006.
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