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Exxon CEO whines about push to cut Big Oils subsidies, after making $6.3 billion last quarter

By Climate Guest Contributor on May 11, 2010 at 8:04 am

"Exxon CEO whines about push to cut Big Oils subsidies, after making $6.3 billion last quarter"

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In its last two budgets, the Obama administration has proposed ending a series of tax subsidies collected by Big Oil companies. This year, the target is $36 billion in tax breaks, including nixing deductions that oil companies collect to write-off the cost of drilling.

In light of the ongoing oil spill disaster in the Gulf of Mexico, it makes sense to reevaluate whether we want to be using the tax code to subsidize drilling for oil, particularly after oil companies reaped billions in profits during the first quarter of this year.  Big Oil is unhappy about this, as discussed in the Wonk Room repost.

Last month, I spoke to Rep. Lloyd Doggett (D-TX), who characterized tax subsidies like those received by oil companies as “barnacles on the code” that aren’t fair to working people. Exxon-Mobil CEO Rex Tillerson, however, appeared on CNBC this morning to claim that the tax breaks are necessary for the oil industry to preserve jobs:

We already are probably the most heavily taxed industry in this country, and these tax breaks as they’re characterized “” and I think many times they are mischaracterized “” are simply provisions in the tax code that are made available to all businesses. I’ll take one in particular, the Section 199 manufacturing tax deduction, was passed by Congress out of a concern that we were losing manufacturing jobs in the country. So now part of the Obama tax proposal is to repeal that Section 199 provision for our industry. It’s not clear to me why a refining job or a petro-chemical job is less valuable than an auto manufacturing job. This is the mischaracterization, in my view, of some of these tax subsidies.

Watch it:

It’s pretty rich to watch the CEO of one of the most profitable companies in American history go on television to insinuate that he will cut jobs if Congress removes his corporate welfare. This year, the company reported first quarter earnings of $6.3 billion, which is up 38 percent from last year. In 2008, it set a U.S. record by making a profit of $45 billion.

Meanwhile, the subsidies that Exxon and other oil companies collect cost the U.S. government billions each year, as Sima Gandhi explained:

It’s hard to believe that oil companies need taxpayer handouts with their prices so high. Yet the government spent nearly $4 billion on oil and gas companies in 2008. Some of these subsidies date as far back as 1919. The specific tax subsidies and how they work have changed over time, but what remains constant is their price tag. Spending taxpayer dollars on already profitable and mature industries doesn’t make sense. Eliminating tax expenditure spending for oil and gas companies would save the government nearly $3 billion next year.

According to estimates from the Treasury Department’s Office of Economic Policy, removing subsidies for the oil industry would affect domestic oil production by less than one-half of 1 percent.

At the same time that it is collecting tax subsidies from the U.S. government, Exxon uses 122 foreign subsidiaries, including 32 in countries that are officially labeled tax havens, to dodge U.S. taxes. It has 18 subsidiaries in the Bahamas, and 3 each in the Cayman Islands, Hong Kong, and Singapore. It also spent more than $27 million lobbying Congress last year, and another $3.3 million so far this year.

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12 Responses to Exxon CEO whines about push to cut Big Oils subsidies, after making $6.3 billion last quarter

  1. PSU Grad says:

    Hey Mr. Tiller, you laid off the brother of someone we know, someone with 25 years at your company…..WITH the tax breaks. Somehow I don’t think “losing manufacturing jobs” is your real concern.

    A $6.3 billion quarterly profit and you lay people off?

  2. mike roddy says:

    These guys are all the same. If you don’t reflexively fight for maximum profits at all times, you are not considered to be macho. There are many negative consequences of this, including environmental and safety compromises.

    Our culture and statutes need to change to require social responsibility on the part of energy companies. If companies like Massey, BP, and Exxon continue to thumb their noses at the public interest, they should lose their charters. There is precedent for this in other countries, including Scandinavia.

    Most fossil fuel executives aren’t even good financial managers. They are so greedy that they overlook basic safety measures, resulting in the only scenarios where an oil or coal company can have a losing quarter, as with the Gulf eruption and the Massey mine collapse. Even nationalization would be better than this.

    We can only prove that we mean business by carbon production surcharges. Let the oil companies whine all they want about paying their share of taxes, and pricing the CO2 they are sending into the atmosphere. To hell with them.

  3. Leland Palmer says:

    Well, if combustion of oil didn’t produce CO2, such subsidies might make some sense.

    But ExxonMobil’s products have produced about five percent of all anthropogenic CO2 ever produced.

    So, ExxonMobil is responsible for about five percent of anthropogenic global warming (AGW).

    The cost of AGW could be hundreds of trillions of dollars in the coming century and ExxonMobil should be held financially responsible for five percent of this cost.

    Since five percent of the cost of AGW exceeds all of the money they have ever made, we should simply seize ExxonMobil, and seize all of the money they have ever made. We should then transform ExxonMobil by force into the production of algae based biofuels and cellulosic ethanol.

    Rather than asking for continued handouts, considering ExxonMobil’s historical pattern of irresponsibility and blatant lying they should shut up and be grateful that we haven’t yet seized them and all of the money they have ever made, to help clean up the mess that they have made.

  4. Chris Dudley says:

    Oil production jobs in the US are bad for the US from a macroeconomic point of view. US oil is expensive to produce and it thus pollutes what would otherwise be a low cost energy source. By fostering a high oil price, US oil production is a domestic job killer. We should not be encouraging domestic oil production in any manner because it is counter to the national interest. We should, instead, adopt a low oil price policy by cutting consumption to the point where the cost of maintaining spare capacity for low cost producers is higher than the benefits of attempting to manipulate oil prices by keeping low production cost oil off the market. Giving Saudi Arabia 6 million barrels a day of spare capacity should be our target so we can eliminate market distortions. It is simply crazy, from an market perspective, that the lowest cost producer has any spare capacity at all at any time. But, to assuage the aspirations of OPEC, we need to provide them with ample spare capacity to get the price of oil down. The method to do that is not to produce more high production cost oil which only encourages a high oil price, but rather to cut consumption so the oil supply does not get polluted with such environmentally risky and fundamentally expensive sources of oil.

  5. WastedEnergy says:

    In the twisted mind of an oil executive, taking away a subsidy constitutes a tax.

    Keep flicking that forked tongue, Rex.

  6. knoxkp says:

    We need these people out of our lives in the worst way and as soon as possible. They are sociopathic, disgustingly greedy and as I l listen to this guy threaten jobs I’m hard pressed to not believe he’s evil.

  7. Jeff Huggins says:

    Let’s Be Clear

    ExxonMobil does not even genuinely care about its own employment figures except that they should be kept to a minimum. Check it out: In the vast majority of years recently, they have reduced employment even as profits have (for most of those years) gone way up. ExxonMobil employs fewer people today than it did three, five, eight, etc. years ago. In many years, employment has gone down as profits have skyrocketed. And, they only employ about 80,000 people worldwide. That’s far, far, far less than a great many other large companies. WalMart employs many times that number of people. General Electric alone employs more people than ExxonMobil, Chevron, and Conoco-Phillips combined. There are more teachers in the State of California alone than the total number of employees of all the major U.S.-headquartered oil companies, put together, worldwide.

    This is not to say that those people aren’t important, of course, but it’s to say that ExxonMobil doesn’t really “care” about increasing employment. Look at their own track record. It’s easy to see, right there in their published reports. Many other industries have had to downsize in much larger numbers. We shouldn’t hesitate one second to do things necessary to protect the climate and the well being of hundreds of millions of people for the sake of a few companies who claim to care about employment but then reduce the number of their own employees even in record-breaking profitable years. Forget it.

    Indeed, they (ExxonMobil) jettisoned ownership of Exxon (and related) branded gas stations because, to them, the retail gasoline business wasn’t profitable enough for their standards.

    Now also, ExxonMobil has claimed that it “needs” these tax breaks in order to invest in the profitable times for the future. But, at the same time they argue that they “need” the tax breaks in order to invest in the future, they send tens of billions of dollars in dividends out to shareholders! In other words, they argue (when tax is the question) that, for the good of society, they need to keep money in the business and invest it back into the business, and then what they actually do with a very great deal of that money is send it in checks out to the shareholders. It’s in their reports. It’s no secret. They brag about it.

    I would like — indeed, I would love — to write a fact-based, well-informed, hard-hitting guest post about some of ExxonMobil’s relevant stats and stuff, to shed some needed light on the matter. Joe, would you consider such a post? (I promise to try to keep it polite, although you’d be able to edit it, of course, if I lose my cool.) I’ve worked in the oil industry (for Chevron Research), I was a chemical engineer from Berkeley, I had offers from Chevron and Exxon and Shell at the time (and still have the letters), I was a consultant with McKinsey, and a Baker Scholar from Harvard, and I’ve been following ExxonMobil as related to the climate change problem for a number of years now. I’ve corresponded, in the past, with one of the members of ExxonMobil’s Board of Directors, I’ve read some of Tillerson’s speeches (indeed, we should talk about one of them!), and so forth and so on. There is so much that should be “brought to light” about ExxonMobil that exists in their own published reports and statements.

    May I please write a guest piece on ExxonMobil? May I? PLEEASSE? This company is a big problem, period (in what it is doing, the way it is acting, the inconsistencies of its arguments, its campaign to delay responsible action, and so forth). The use of ExxonMobil products alone, each year, puts over One Trillion Pounds of CO2 into the atmosphere, each year. That doesn’t even include the amounts generated in their internal operations. Nor does it include other GHGs.

    One of my favorites is when Tillerson quotes Bertrand Russell about how we all must care about future generations. Blah, blah, blah. I’ll share that quote (and reference the speech) if I can write a guest piece. Pleeasseee!

    (To be clear, I’d rather be at the beach, but someone’s gotta do it.)

    Cheers,

    Jeff

  8. MADurstewitz says:

    To paraphrase Tacitus:

    They created a desolation and called it Profit.

  9. Chris Winter says:

    Jeff,

    I for one would like to see Tillerson quoting Bertrand Russell. As I recall, a few years back, ExxonMobil touted its grant to Stanford University for alternative-energy research. This was $100 million for ten years. Now that would be fine, except that:

    * They’ve probably spent more than that on lobbying and “think-tanks” intended to preserve the status quo; and
    * Tillerson’s benefits package that same year was $140 million.

    With profits like ExxonMobil is making, being a good corporate citizen should be easy. But lip service is about all they seem to manage.

    Last point: If I’m on welfare and I get a job, I’m expected to cut back on what I get from the government proportionately. Seems to me the same should be expected of corporations — especially in the light of the Citizens United decision.

  10. WastedEnergy says:

    Chris,

    They also sank $500 million a couple of years ago into dead-end algae research.

  11. Bill W says:

    We see the same things over and over. If you try to regulate a corporation, they’ll scream “it’ll cost jobs!”. If you try to cut a government budget, they’ll scream “we’ll have to cut police and fire!”

    I don’t listen to either argument any more, and neither should you.

  12. Matt Dernoga says:

    Did the proposal in Obama’s first budget for eliminating some oil subsidies get stripped out? I’m curious as to what the pressure points are in the Senate that are standing in the way of this happening. Conrad on Budget and Taxation?