Profits way up at Exxon and Shell. That sounds to me like a good time to implement John McCain's plan for a "summer holiday" tax cut for oil companies! After all, with all these skyrocketing profits their tax bill must be on the rise as well.
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The Good Times Roll
31 Jul 2008 12:15 pm
Comments (20)
And, Mr. Just A Comparison, your point is.....?
McCain's plan is a bad idea but it's not a tax cut for oil companies. It's a cut in the federal gas tax. The corporate tax for the oil companies would stay the same. Exxon actually buys more crude than it sells.
Eddy Elfenbein, what would happen would be that prices would rise to fill in that 18 cent gap. People are used to paying for the tax, so the tax will be paid, the price of gas will just go up if it is rescinded. Except the money will be going to the oil companies instead of road construction, mass transit, etc.
McCain actually talked about that this week, and claimed he will shame the companies into not raising their prices to fill in the gaps. Straight talk!
Eddy,
The fact that Exxon buys more crude than it sells indicates a large in-house refining component. The single biggest beneficiary of a gas tax holiday would be the US refining industry.
Joshua - I'm not sure prices at the pump are as sticky as you seem to imply. Njorl - you're correct, XOM has a very large refining biz which incidentally has seen its profits plunge last quarter.
I don't drive, but I do own Exxon-Mobil stock. The good times are indeed rolling. If McCain gets his offshore drilling and his war with Iran, I can probably retire. Of course, offshore drilling won't have any near term effect on supply, but that's a good thing for Exxon-Mobil. They certainly don't want a sudden increase in supply to cut into their profits. But they do want to put lease holdings on their books as quickly as possible. It gives them assets they can leverage to buy back more of their stock. And buying back their stock is Exxon-Mobil's primary business these days.
> I'm not sure prices at the pump are as
> sticky as you seem to imply.
Really? You think that lack of supply isn't what is driving gas prices?
It sounds like an even better time to implement McCain's "shame the oil companies" plan. Why bother with a tax holiday when we can just use public opinion to get them pass the money on to consumers?
Further on the Exxon Mobil story -- this is the lead sentence on the AP article:
"Exxon Mobil Corp. reported second-quarter earnings of $11.68 billion Thursday, the biggest profit from operations ever by any U.S. corporation, but the results were well short of Wall Street expectations and its shares fell. "
Is there a better expression of the Bush era ethos? Mr. Burns would approve.
"Exxon Mobil Corp. reported second-quarter earnings of $11.68 billion Thursday, the biggest profit from operations ever by any U.S. corporation, but the results were well short of Wall Street expectations and its shares fell. "
Maybe it would be (relatively) better if McCain shamed Wall Street into lowering their expectations? Then there wouldn't be so much pressure on the oil companies.
I don't know, I don't think Wall Street responds to shaming, especially when they're drunk.
Actually, I am curious about Mr. Just A Comparison's comparison.
My girlfriend, who is not republican but is taking economics courses, pointed out that while oil company profits may be high in terms of dollars, they are actually low in terms of margins. So why do we complain about oil companies gouging the consumers when (for instance) Apple actually has three times the profit margin? Sure, Exxon is racking up the largest profit ever of all time, but that is a function of the fact that Exxon is incredibly huge.
I did some Googling (those gougers!) to see if there was a refutation of this argument somehow, and while I found that right-wing types trot it out to defend the oil companies, left-wing types don't seem to have any response. And I don't mean that they have a weak response, I mean I haven't found anyone who even addresses this argument.
So I put it to you all-- If oil companies are operating at relatively slim profit margins, then what is there to take issue with?
(And the argument that they shouldn't be getting government hand-outs is countered by the fact that the US needs the product to keep itself running, so the government needs to make sure that they stay in business rather than quitting for the high-margin world of search engines or personal computers.)
Last I heard, Apple Computer wasn't involved in the organization of the Iraq government after the US invaded the country.
The tech industry tends to run on large margins due to the nature of the product. Commodities providers, not so much. It's rather harder to pump oil out of the ground, then lug it thousands of miles, run millions of gallons of it through tanks and pipes and still make a buck than to duplicate another DVD or assemble a PC on a conveyor.
So what?
Again, the IT industry isn't bribing the government to invade countries and murder millions of people for its benefit.
Incidentally, as per Exxon's conference call Thursday morning, the company's effective tax rate in the second quarter was about 49%. Despite its record earnings, the stock was also down almost 5% today after missing the analysts' consensus estimates.
The company bought back another 2.7% of its stock last quarter as well. At ~$80 XOM is a buy (barring the passage of some punitive tax bill that targets only the handful of major U.S. integrated oil companies).
the company's effective tax rate in the second quarter was about 49%.
I call bullshit. How does that math work out?
Again, the IT industry isn't bribing the government to invade countries and murder millions of people for its benefit.
Yeah, that's what they want you to believe. "Silicon" Valley passed peak production sometime in the 80's(notice that was the last time James Bond had to take out a supervillian there.) And you know who has a lot of sand? Afghanistan and Iraq *both.* And you know who else? Iran. Coincidence?
Of course the Valdez spill and record profits are what most people associate with Exxon, but did you know that they used to be in the bicycle business? In 1976, their Exxon Graftek paved the way for other lightweight carbon fiber bicycles. Just some interesting trivia...
I thought this blog was moving today?
Ed Marshall,
the company's effective tax rate in the second quarter was about 49%.
I call bullshit. How does that math work out?
Here's how the math works out. Refer to p.8 of the company's press release PDF. All numbers are in millions of dollars.
The "income before income taxes" number [22,206], includes post-taxes income from Exxon's equity companies, so you have to add the taxes those companies paid [888] to that number. You also have to add that 888 to the main income tax number, 10,526. So here's the math:
(10,526 + 888) / (22,206 + 888) = .494 or 49%.
Note also, that income taxes aren't the only taxes Exxon Mobil paid last quarter. It earned $11.6 billion in profit but paid $32.4 billion in total taxes.
Ed Marshall,
the company's effective tax rate in the second quarter was about 49%.
I call bullshit. How does that math work out?
Here's how the math works out. Refer to p.8 of the company's press release PDF. All numbers are in millions of dollars.
The "income before income taxes" number [22,206], includes post-taxes income from Exxon's equity companies, so you have to add the taxes those companies paid [888] to that number. You also have to add that 888 to the main income tax number, 10,526. So here's the math:
(10,526 + 888) / (22,206 + 888) = .494 or 49%.
Note also, that income taxes aren't the only taxes Exxon Mobil paid last quarter. It earned $11.6 billion in profit but paid $32.4 billion in total taxes.
Ed Marshall,
Did that explanation make sense to you?
Comments closed August 14, 2008.
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Heads in the Sand
XOM:
Gross Revenue: $138 Billion
Profit: $11.68 Billion
Percentage: 8.5%
GOOG:
Gross Revenue $5.3 Billion
Profit: $1.2 Billion
Percentage: 22.6%
and the former root of all evil, SBUX, posted a loss. Maybe they should get a bailout like the bank and housing sectors.
Posted by Just a comparison | July 31, 2008 12:31 PM