Energy, Taxes and Exxon

Mark Green
Posted May 10, 2011

Exxon made $10.7 billion worldwide in the first quarter of 2011, which even in Washington, D.C., is a large amount of money. But then, ExxonMobil is a large company, with large, global operations. Its $10.7 billion in earnings was on $114 billion in total revenue - the remainder after about $77 billion in expenses and approximately $28 billion in taxes paid to governments. Indeed, ExxonMobil's U.S. tax bill ($3.1 billion) was more than its U.S. earnings ($2.6 billion).

Bottom line: ExxonMobil earned about 9 cents on each sales dollar - about half the return of some other industries.

So why is the administration complaining about energy company profits while calling for ending tax deductions available to a broad range of U.S. businesses? Good question.

"This is a very tough business, a low-margin business," ExxonMobil's Ken Cohen told bloggers on Monday. Complicating the toughness is the "whimsy" of government policy, Cohen said, and the oil and natural gas industry's profile. "We are an irresistible target."

That means sitting in the crosshairs of efforts to eliminate tax deductions only for oil and natural gas companies, even though similar deductions are generally available to all business. A Senate proposal expected this week would end a manufacturing deduction - but only for five oil companies. The result? Higher taxes.

So here's the question: How does increasing the cost of producing energy though punitive, industry specific higher taxes address rising gasoline prices? It doesn't. Neither do anti-drilling policies that have effectively shut down one of the largest producing areas in the world (Gulf of Mexico).

Meanwhile, the administration is encouraging Brazil to produce more oil for U.S. purchase. "The incongruity of that is striking to us," Cohen said Monday. Indeed it is.

Additional resource:

ExxonMobil's Perspectives: Relevant numbers for Washington