Hiding in the Backwaters Just one more blog on the net.

Crude. Black Gold. Texas Tea. Oil, that is.

Rising gas prices are getting more press with elections looming and incumbents fearing some backlash from voters. Much is being made of ExxonMobile's record $36.1 billion profit in 2005 and their record breaking Q1 in 2006 that is putting them on track to break another profit record for 2006. I found this little breakdown of the numbers interesting.

To put things into perspective, Exxon's profit in 2005 amounted to six dollars for every single human being on the planet. Put another way, this astronomical profit was enough to buy almost 45 gallons of petrol (at $2.75/gallon) for every man, woman and child in the Evil Empire. This is equal to nearly ten percent of overall consumption for 2004.¹

While I am not happy with gas prices at the pumps—mostly because my income isn't even keeping pace with inflation, which wanders between 3% and 5%², much less the 20% increase in gas prices this year—I'm not necessarily upset with oil companies making record profits. Conditions favor them right now, so bully for them. Of course, you have those who believe that the two oil men in the White House have engineered this crisis in the Middle East to drive oil prices up. I tend to be highly skeptical of conspiracy theories in general. So we'll just move on.

My biggest issue with the record profits of oil companies is the fact they receive unbelievable handouts from our federal government. The Energy Policy Act of 2005 included $2.8 billion in tax breaks for fossil fuel production.³ It is incomprehensible to me that when a single player is posting record profits of $36 billion, they are still able to convince the bone-heads on Capitol Hill they need handouts. They don't need tax breaks. Multinational corporations like ExxonMobile have plenty of tax shelters of their own.

One recent study by Tax Notes found that subsidiaries of U.S. corporations operating in the top four tax havens (the Netherlands, Ireland, Bermuda and Luxembourg) had 46.3 percent of their profits in those countries in 2001, but only 9 percent of their employees and 12.6 percent of their plant and equipment.⁴

What a shock, ExxonMobile has a presence in the Netherlands, Ireland, Bermuda and Luxembourg. But Congress still seems to think (or at least seems to believe we'll buy it) that we can lure companies back to the U.S. by handing them money.

This bill spends capital at home to produce our own energy, create jobs and lessen our dependence on foreign sources of oil," said House Resources Committee Chairman Richard Pombo.⁵

What an idiot. It is always (or at least for the foreseeable future) going to be cheaper to operate abroad no matter how many tax breaks and subsidies we give away. The reason we are dependent on foreign oil is not because there is no oil to be had in the U.S. It's not because the U.S. extracts exorbitant tax revenues from corporations. It's cheaper for the same reason we buy toys from China. It's cheaper for the same reason we buy milk from Mexico. It's cheaper for the same reason we buy shirts from Indonesia. Cheap labor. No one likes to pay taxes, but I suspect that for companies operating in the U.S. employee salaries and benefits make up a much larger chunk of operating costs than taxes ever have or ever will. That doesn't mean they aren't going to turn down free money.

Whether I get nailed at the pump or have it added to my tax burden, I am paying for it either way. Frankly, I'd rather pay at the pump because I believe there are fewer pockets to line paying directly at the pump versus paying for my fuel via payroll deduction.