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Hypocrites and the Big Oil Holiday Ham

May 11, 2008

The political world is keeping an eye on oil profits like an enormously juicy glazed Christmas ham. The government versus the free market debate rages on as everyone in the public eye fights over who is going to decide future energy choices and costs.

The American public has seen a vacuous energy banter go on for years under the pretense that everyone is looking for the next big energy deal. In the same way that gamers play the slots in Vegas, the big dogs keep pumping the slot machines in hopes of having a great idea while enjoying pulling on the one-armed bandit. The workaholic Thomas Edison wouldn’t agree with such things. We would still be using oil lamps if government was directly involved in the process of ingenuity and hard work in glory days.

Government hungers for a windfall profits tax. What Big Gov will use that glorious tax for depends on who you talk to. Ronald Reagan’s experiment with windfall profit taxes in the 1980s proved to be economically devastating. The windfall profits tax failed to raise even a fraction of the revenue that was forecast, crippled the production of the domestic oil industry and brought in the Arabs and speculation with a vengeance.

The common excuse is that Big Gov is going to give Americans a break from energy prices and magically jumpstart research into renewable energy, an event that is always just outside the grasp of the nation and technology, much like the gold at the bottom of the rainbow. Reality doesn’t matter. All the big talk makes for good election conversation, which makes politicians feel good.

One thing that Big Oil has been doing recently with enormous profits is buying back shares from the public market to garner more control and profits from their publicly-traded stock. Spending on existing oil fields is up 47% from a few years back and exploration has surged 80%. Never mind that oil exploration is the smallest effort made in the scheme of Big Oil. Then again, Big Gov has tied the hands of Big Oil on most federal lands and onshore drilling. Big Oil could buy “half of Nevada” with some profits and embark on a drilling program if it could work through the proliferation of federal laws to make it happen.

Big Gov is heavy on the taxes. American motorists pay an average of 47 cents per gallon in state and federal gasoline taxes. A motorist that uses diesel fuel pays more than 53 cents per gallon on average. In the meantime Big Gov collects billions from energy companies in corporate income taxes, off-shore royalties, severance taxes, payroll taxes, property taxes and strategic mineral management.

The really entertaining part of the current scheme is that Big Government is skimming 15% from all oil produced on federal lands, which it expects to nearly double by next year with the idea of filling the Strategic Oil Reserve and participating as a dealer in the market for profit.

The recent scandal within the Interior Department, which manages the royalty-in-kind program, has not been encouraging. Oil companies leasing federal land to drill for oil are required to pay the government royalties based on a percentage of their sales. Under the royalty-in-kind program, oil companies pay in the form of oil and gas instead of cash. The government says this scheme is simpler and more efficient because it reduces accounting and transaction efforts. This is code for government-endorsed fraud without accountability.

The government is free to do as it pleases with the oil for its’ own benefit and the benefit of government administrators. The government has tried to make the case that oil prices have increased more than the value of the oil and gas royalty revenues being received, meaning that the oil companies are managing to withhold a growing amount of their profits from Big Gov. Completely ignored is the fact that oil removed continuously from the Strategic Reserve and the Mineral Management Service is put on the open market for the profit of Big Government. The asset value of the Strategic Reserve has no doubt increased as well because of rampant speculation in the market, which big government supports as a perceived money-making tool.

The evidence is that Big Oil is already providing a windfall of tax revenue. Various proposals aimed at the oil industry have nothing to do with fairness or righting a wrong. Big Gov wants more revenue and is weighing public opinion to get it. Big Government loves to target success in a never-ending search for funding, whether real or imagined.

TNTalk! previously cited that gasoline prices are much lower than they should be when compared with the cost of a spot market barrel of oil. Big Oil is making money in distributing other oil products, which enables the United States to enjoy lower gas prices than much of the world except for other countries than are noted as “oil-producing nations”. Federal policies, many dating from the 1970s, continue to raise U.S. gas prices.

Some sources cite that energy-producing countries of Saudi Arabia and Venezuela enjoy comparatively low prices of gasoline compared to the remainder of the world. While American imports far more oil than it produces, Big Government has made a conscious choice over the years to buy into the speculative market for the profit of the government, government officials, corporations and speculators. Big Gov heavily suppresses, regulates and taxes the country’s ability to produce oil for its own use in an effort to make a long-term cash cow from the industry while suppressing new technology and creativity under the guise of environmental responsibility.

E. Manning

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