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Record Profits For Exxon as U.S. Economy Crashes

It's clear where the Republican administration's economic priorities are - and it's not your 401K retirement plan...

Exxon Mobil Corp., the world's biggest oil company, said third-quarter profit jumped 58 percent, exceeding analyst estimates, as record crude prices made up for the largest drop in output in at least a decade.

Net income rose to $14.8 billion, or $2.86 a share, from $9.41 billion, or $1.70, a year earlier, the Irving, Texas-based company said today in a statement. Profit excluding one-time items, such as a gain on a pipeline sale, was an all-time high for any U.S. corporation and was 18 cents a share higher than the average of 13 analyst predictions compiled by Bloomberg.

Earnings from oil and gas wells alone were higher than the company's total profit a year earlier, even as output fell 8.2 percent, the most since at least 1997. After touching a record above $147 a barrel in July, crude prices tumbled $80 as demand for fuel grew at the slowest rate in 15 years.

Joe Biden:

"Just this morning we received two pieces of news. One, first, the Gross Domestic Product, that is all the things that come in, everything about our economy, the measure of our economic strength, actually shrank," Biden said. "The second thing we learned this morning is Exxon Mobile, Exxon Mobile announced its largest quarterly profit ever. They made $15 billion this past quarter."

"Here the entire economy of America is shrinking, and the oil companies are, this one in fact, made the largest profit in its history in a quarter. Ladies and gentlemen, what more evidence do we need that the Exxon Mobiles of the world don't need a tax break?"

"That $4 billion should go to middle class taxpayers, people who need the money," Biden said to applause. "John and Governor Palin have this upside down. They literally have it upside down."

Related: GOP Oil Suckups are Wrong Again


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Rating: 2.5/5 (8 votes cast)


Comments (16)

carlos marroquin:

It's nothing new to know how this big Oil Corp. are profiting. We all have become slaves to their control. I really believe that our Government is responsible for what has happen to America and its economy. Why have they allowed the Oil Industry to manipulate us in this fashion? This is nothing new. I blame both Democrats and Republicans. They are responsible for what has happen to us. The United States of America have and has have the capability to run and operate without the dependency of Oil. We all know that, but they have allowed to continue to follow this course. Why? Greed, corruption, back doors deals, manipulations, sellouts, etc, etc. Don't tell me that we don't have the technology to create a car that can actually run on water. Don't tell me that we don't have enough technology available to warm up our houses without Oil. It's about time that somebody steps out to the plate and starts to really get the ball moving and call on this issues to the table! Why do this people keep on profiting while the whole country goes to ruin?
Come on....all the elected Officials need to start stepping to the plate or get out of office.
Now they are talking about bailing out the Auto Industry! Why the Oil Corp. don't bail them out? They have gotten rich by using each other!

I'm calling on our Government to put a stop to the madness of the Oil Industry!
We have the capacity and knowledge to create cars that run on water or other technologies rather than Oil. Please stop this madness!
I sure hope that who ever gets elected have the ....to stand up to them. As for McCain and Palin it would definitely be a waste of four more years. All they can say is DRILL, BABY DRILL! They are pathetic.

Mike:

If ExxonMobil earning money is such a bad thing then you should be congratulating Ford and GM for doing so badly that they need a $25 billion government bailout.

Maybe President Obama can sign a federal law mandating that people making over $200,000 (or is it $250,000 or $150,000 now?) can only buy Ford and GM cars, and are forbidden to buy their gas from an Exxon or Mobil station.

Maybe he can force ExxonMobil to buy only heavy, sour crude from Venezuela, and then force them to eat the extra costs associated with refining that kind of oil. That'll cost them billions, plus prop up our new comrade Chavez.

And what happens to the hundreds of thousands of legacy employees of ExxonMobil who depend on the profitability of the company to prop up their retirement portfolios and pay for their health benefits? Hey, no problem. We'll have socialized medicine plus a glorious "guaranteed" government retirement account that pays a 3% annual return.

Viva El Obama!

Lee Ward[TypeKey Profile Page]:

Nobody said erning money was a bad thing, Mike. Clean the moose crap from your Palin-loving ears.

Record profits as the rest of the nation slumps into a recession clearly shows that the oil companies have been the favorite child of the Republican administration -- while record foreclosures and thousands of Americans are losing their jobs, oil company suckups like you are cheering on the oil companies.

"And what happens to the hundreds of thousands of legacy employees of ExxonMobil who depend on the profitability of the company to prop up their retirement portfolios and pay for their health benefits?"

What are you babbling about? Nobody is talking about harming your precious Exxon employees, dear Mikie. But an economic and energy policy like the Bush/McCain plan which is built on record profits for oil companies while Main Street Americans suffer is not good, Mike. If you were a true American instead of an Republican knee-jerking anti-abortion drone you'd recognize that.

Viva Americans instead of Corporations! That's Spanish for vote Democratic.

Lee,

There is a party that is clearly biased toward the oil companies on political grounds, and that party should be easy for you to identify. Find a mirror.

Oil companies make profits worldwide because they do business worldwide. Joe Biden is fond of saying that the US uses 25% of the world's energy or oil, can't remember the exact quote. Assuming it's petroleum then that means 75% of the oil sector's profit came from overseas.

The record profits are a direct result of the record increase in oil prices, Lee. Oil is a worldwide commodity, the US cannot fix oil prices any more than it can fix the price of wheat. I will bet that this quarter, when oil prices have fallen from $145 or so to $65, the oil companies will not log record profits. This is because they keep a percentage of the price of their products as profits, about 8-9%. Microsoft keeps 45% or so, as does Apple. I don't see you wanting to frogmarch Steve Jobs in front of Congress for ripping off the American people.

The truth is that large Western international corporations control about 10% of the world's known oil reserves. State companies control about 77%, according to a paper from Rice University. If companies like XOM are doing well, you can only imagine how the Dear Leaders of Venezuela, Russia and Iran are doing. Funny that you have time to get incensed about one of the Western supermajors but the huge amount of money extracted from the US economy and sent to Venezuela through Citgo apparently doesn't bother you overmuch.

The funny thing is that by tanking XOM you will only add XOM's employees to the list of people facing foreclosure and job loss.

Nice one, I can't wait for people with your mindset to make economic decisions. It will be like Luddites hosting a science fair.

Lee Ward[TypeKey Profile Page]:

"The funny thing is that by tanking XOM you will only add XOM's employees to the list of people facing foreclosure and job loss."

here again we see the Republican practice of misrepresentation and distortion as a part of everyday political discourse.

I criticized the Bush/McCain economic and energy policies that result in record profits for Exxon at a time when Americans are seeing their home values plummet and 401Ks turning to 101Ks.

And you, just like McCain and Barbie, obviously don't give a crap about middle-class Americans if you spin that to mean that Exxon should be punished and layoffs would result from reigning in record profits.

Amazing. Do you just not understand - or is the blogosphere just a place to spread Republican lies? Which is it, Darren?

Favoring Main Street instead of wall Street will not result in layoffs - it's the working people of America that Democrats are protecting - instead of Exxon's million-dollar executives.

Your dishonesty is a shining example of the extent to which Republicans lie and distort.

Lee,

I do not believe you criticized any particular policy. You simply stated the facts of oil companies making record profits and increasing foreclosure rates. These are indisputible facts.

What is much more disputible is your conclusion that the two events are a) related and b) part of the Bush Administration's energy policy. First, you're confusing coincidence and causation. This was also a record 12 months for Apple Computer, was that also part of the Bush plan?

Second, energy policy is arrived at through a combination of Congressional and executive action. There has not been an energy policy because there has not been a coherent energy bill or energy debate from the Congress, only a series of COBRA bills to fund government while the Dems do next to nothing. The Bushies have done some things, like making NRC paperwork easier to file for carbon-free nuclear plants, and I did get a tax credit when I bought my hybrid year before last. Those are examples of government action on energy that have made a difference, but unfortunately those are examples of cooperation that occurred years ago.

If you want to take away the exploration tax credits the oil companies get for spending money to drill through 10,000 feet of water and 7,000 feet of rock to get more oil, then that's a reasonable call. It's hard to suggest that XOM needs a tax credit or deductions for exploration when they have $14 billion in profit. I will join you in that.

Nevertheless, the oil coming out of the ground in KSA at a production cost of $2 a barrel must be replaced by oil from the deep Gulf of Mexico at $60 a barrel. If you're telling companies through tax incentives and the lack thereof that looking for more oil is not something you want them to do, then they won't. This will only make the dwindling supply of oil that much more profitable for the people who have it to sell. In the US, it's the Western supermajors who do more of the selling.

In the long run, making the oil more valuable by making it more expensive to replace it will only lead to higher oil company profits in the future. It's the unintended consequences that many political liberals are either unable to conceive of beforehand, or take responsibility for later.

The choice is yours. But XOM didn't get big by being stupid. It would seem to me that you would be much more supportive of XOM if they were putting their profits into something like algal biodiesel, I know I would. Rather than trying to beat XOM out of a sense of fairness, it would seem to be much more reasonable to make them find other hydrocarbon sources that meet your ends.

But hey, punitive taxation is "fair", and that's more important than energy independence, right?

Lee Ward[TypeKey Profile Page]:

Taxing windfall profits and forcing those revenues into alternative energy will indeed lead us to energy independence faster.

We've learned that the Bush/McCain approach towards energy independence simply doesn't work - as record profits for Exxon while Americans struggle to put gasoline into their tanks clearly demonstrates.

It's time to stop favoring the oil companies - after 8 years of Bush and Cheney it clearly hasn't worked. McCain is just more of the same.

The current administration's approach to energy was forged by Cheney meeting behind closed doors with oil company execs back in 2001. A deal was struck, record profits are the result, and Main Street America is paying the freight. It's time for a change.

Goodness, Lee.

We've learned that the Bush/McCain approach towards energy independence simply doesn't work - as record profits for Exxon while Americans struggle to put gasoline into their tanks clearly demonstrates.

Stringing along nonsequitors does not pass for argumentation, dude.

First you talk about energy independence, which refers to the source of our energy and whether it's domestic or foreign.

Then you talk about the economics of oil companies making money (issue #2) while Americans as a whole have financial problems (issue #3).

Proportionately Americans spend about as much of their budget on energy now as they did in the 1950s. Your basis of comparison is a time when energy was exceptionally cheap by historical standards, yet you do not acknowledge this.

The US could be energy independent if we went to an industrial-scale Fischer-Tropsch process and gasified our coal into oil. At least one other country did this decades ago. Poof, we're energy independent.

Of course coal gasification is more expensive than importing foreign oil, being more expensive than oil happens to be the one quality every alternative energy source shares at this point. What this means is that the solution to Issue #1 makes Issue #3 worse, and doesn't affect Issue #2 in the least. You haven't undone a knot, you've just made a new one.

A deal was struck, record profits are the result, and Main Street America is paying the freight.

The whole world is paying the freight, Lee. Remember, we only consume 25% of the world's oil production. The rest of the world is paying 75% of the freight, that's the way it works with commodities.

It's time for a change.

Back to the Future! How did the last Crude Oil Windfall Profits Tax work out? Check out the Wikipedia entry, it says that it a) increased dependence on foreign oil and b) fell short of its intended revenue by 80%.

Since prior efforts have failed miserably at your two goals -- increasing energy independence and collecting reveue for redistribution -- I don't believe your current effort will be any more successful.

But good luck with that. I wonder if it will take as long to repeal this one as it did the last one.

Lee Ward[TypeKey Profile Page]:

The previous windfall profit tax fell short of revenue projections because the price of oil was low in the years following the enactment of the tax.

If that was the outcome from a 2009 windfall profit tax nobody would complain -- except Exxon.

engineer:

"The previous windfall profit tax fell short of revenue projections because the price of oil was low in the years following the enactment of the tax.

If that was the outcome from a 2009 windfall profit tax nobody would be complain -- except Exxon."

The lower price of oil had nothing to do with the windfall profits tax. If anything, it exacerbated the existing recession. (Employment data)
http://www.econstats.com/BLS/blsnaa4.htm

Oil had climbed in price due to 1.) the Iranian revolution in 1979 and 2.) the 1980 Iran/Iraq war.
http://en.wikipedia.org/wiki/1979_energy_crisis
Carter passed the windfall profits tax on April 2, 1980.
http://www.taxfoundation.org/publications/show/1168.html
The price of oil fall due to a recession (lessening demand) and overproduction (increasing supply) from the Saudi and in other countries to meet the lack of production from Iran/Iraq.

So don't think for a minute that the 1980's windfall profits tax lowered the price of oil (unless you are okay with recession). And a windfall profits tax on oil today won't lower the price of oil either.

Well, engineer, it might make the recession worse, so from that standpoint the WPT might help lower oil prices. If you'll remember, Nancy Pelosi said in early 2007 that the House Democrats "had a plan" to lower gas prices. Apparently the plan was a major economic catastrophe. Gas prices are now lower -- QED.

It's also worth mentioning that the lower oil prices were also part of a broader geopolitical plan by the Reagan Administration to starve the USSR of hard currency. Oil was their most profitable export, and when it dropped to $7 a barrel only the Saudis could make money on it. The USSR collapsed -- end of story.

That was a one-off, though. The Saudis probably don't have that surge capacity left in their oil reserves.

Lee Ward[TypeKey Profile Page]:

Where we are now --

Republican administration - check!

Record Oil Profits - check!

Recession - check!

Plummeting 401Ks - check!

Windfall profits tax - nope!

Alternative Energy Initiative - nope!

Offshore Drilling ban lifted - check!

Consumer Spending Plunging - check!

GDP negative - check!

Home Prices falling - check!

Unemployment increasing - check!

All voters need to do is add up what they've gained from the 8 years of republican priorities, and what they've lost.

Lee Ward:

By the way - do you two knuckleheads realize that Sarah Palin instituted an oil company windfall profits tax in Alaska?

In 2007 Palin pushed for and enacted a major increase in state oil taxes - a step that has generated stunning new revenues for Alaska as oil prices have soared. The Alaska Oil and Gas Association estimates the state collected $6 billion from Palin-imposed windfall taxes during the fiscal year that ended on June 30, 2008. Combined with other new and existing oil taxes, as well as royalties, the state's total oil revenue in the last fiscal year exceeded $10 billion - double the amount the state received the previous fiscal year. [1]

Palin's windfall tax will fund a $1,200 "rebate" that Alaska will give to every eligible man, woman and child in Alaska, to help offset soaring fuel prices. That money will be dispersed as part of larger, $3,269 check that Alaskans will receive that was paid for by state taxes on oil companies - a family of four will receive a check for $13,076. The fuel rebates will cost the state $750 million. [1-3]

It didn't reduce the price of oil, and I never suggested it would - I only stated that the reduced revenues cited by Darren from the previous federal windfall profits tax were the result of lower than expected oil prices...

but as you can see, an oil company windfall profit tax benefits working Americans.

Did it drive Alaska into a recession - nope!

Did it discourage drilling - nope!

Obama would institute a windfall profits tax just like Sarah Palin did in Alaska.

engineer:

"By the way - do you two knuckleheads realize that Sarah Palin instituted an oil company windfall profits tax in Alaska?"

How do you institute a practice that already existed? Except it didn't exist, and still doesn't.

Governor Palin has never instituted a windfall profits tax on oil. She openly renegotiated the existing severance tax with the oil companies.

http://www.centerfortaxstudies.com/blog/taxnews/2007/12/27/alaska_severance_tax_governor_signs_petr

The tax on Alaskan oil is a severance tax. This is a tax that the state charges to the oil companies for oil removed from the ground. The tax is charged to recover the valuation loss from the non-renewable resource being removed, ie the land is now worth less. The land that most of the oil is produced on is state owned. The tax is charged whether the company makes a profit of $1.00/barrel, $50.00/barrel, or has a loss of $100.00/barrel. The tax is not charged on income that the oil company may make on oil or on any other venture (selling drills or providing transportation). The amount is based on the price of the oil, not the profit on the oil. Many states have severance taxes. Kentucky has one on coal.

http://beldar.blogs.com/beldarblog/2008/08/dont-be-misled.html
A windfall profits tax is a tax on a company's profits, that government deems is excessive. From wikipedia "A windfall profits tax is a higher tax rate on profits that ensue from a sudden windfall gain to a particular company or industry." President Carter's version was an excise tax, in that it only taxed domestically produced oil. A true windfall profits tax, taxes profit on all income, whether domestic or foreign, or non-related to oil. It is a tax in excess of the tax the company presently pays. President Carter's tax caused domestic production of oil to decline, as companies could buy cheaper imports and avoid the tax.
The Obama plan is to have a windfall profit on all the profits made by the oil companies, whether by producing and selling oil or by selling soda at the gas station. This is totally different than the severance tax on Alaskan oil. Furthermore, the Alaskan severance tax is given to all Alaskans, not just those who make a certain amount or less. The theory is that all Alaskans own the public land and all profit equally.

Lee Ward:

A tax by any other name cuts into profits just as deep -- and kicks in only when oil prices rise (and benefits taxpayers just as strongly - that's why Palin enacted the windfall profits tax in Alaska) ... but don't take my word for it --

Seattle Times: "Windfall tax lets Alaska rake in billions from Big Oil"

Hot Air: "Palin backed Alaskan windfall-profits tax"

Huffington Post: "Palin's Alaska Reaps the Windfall Profits McCain Decries"

Ft Worth Business Press: "Palin record questioned by many in energy industry"

One of Palin's first acts as governor was to support additional taxation of the oil industry, an idea supported by her predecessor, former Gov.Murkowski. Murkowski wanted to use the additional income to finance the natural gas pipeline from Prudhoe Bay to Canada at an estimated cost of $20 billion. Palin's new tax will refund the money to "deserving" Alaskans.

Palin's support of a new tax on the oil industry is patterned after the so-called Windfall Profits Tax. Ironically, her political partner, Sen. John McCain, has opposed such tax policies, but Democratic Presidential candidate Barack Obama, supports a similar tax that would generate enough money to give $1,000 back to "deserving" citizens.

Palin originally supported the tax measure in 2007 that is tied to a base price of oil produced on state-owned lands. Any amount paid over that base is considered excessive. Deductions are allowed for some costs associated with crude oil production and gathering. The tax is imposed on the "net profit earned on each barrel" only from state lands, but most of the state's oil production comes from state-owned minerals. "Net profit" is computed by deducting production and transportation costs estimated at $25 per barrel. The tax is set at its highest rate in Prudhoe Bay, where the state takes 25 percent of the net profit of a barrel when its price is at or below $52. The percentage then escalates as oil prices rise over that benchmark. Alaska collects about $49 of a $120 barrel, excluding other fees, but some estimate that the state takes about 75% of the gross value of a barrel of oil.

She signed a bill on August 25 that uses revenues generated from the state's natural resources to provide a one-time special payment of $1,200 to every Alaskan eligible for the 2008 Permanent Fund Dividend. In theory, the $1,200 payment is designed to help Alaskans cope with higher energy prices.

Boston Globe: "Fueled by oil taxes, Alaska spending soared under Palin"

With no statewide income or sales tax, Alaska funds about 90 percent of the state budget from royalties and taxes on oil producers. Soaring oil prices and a higher windfall oil profits tax - an increase pushed through by Palin, now the Republican vice presidential nominee - have state coffers overflowing with petrodollars. The Alaska oil industry calculates that its annual payments to the state doubled in a single year to $10.2 billion.

Time Magazine: "Sarah Palin's Alaskonomics"

Although Palin's words side with McCain in this dispute, her actions side with Obama. Her major legislative accomplishment has been to revamp Alaska's windfall-profits tax in order to increase the state's take. Alaska calls it a "clear and equitable share" tax. The state assumes that extracting oil from the tundra costs about $25 per bbl. and takes as much as 75% of the difference between that and the sale price.

CNN: "Palin to play ball with Big Oil"

In late 2007 Palin succeeded in raising the tax on oil companies from 22.5 to 25% of net profits. Alaska also added a clause increasing the tax for each dollar oil goes above $52 a barrel - essentially, a windfall profits tax.

LA Times: "Palin gives and saves amid big Alaska surplus"

Palin's vetoes marked the largest capital budget cuts in the last 10 to 15 years, said Gerald McBeath, a political science professor at the University of Alaska at Fairbanks.

"She has the potential for exercising budget discipline with legislators who see money on the table and want to spend to the last dime," he said.

The budget surplus also comes from a new windfall profits tax on oil companies that has tripled the state's take on production taxes.

[note to readers - if readers use more than two links in a single comment the Moveable Type software holds your post in a queue assuming it's spam. If that ever happens to you just email me at leewardblue at gmail dot com and I'll publish the comment]

Lee,

Quoting many reporters who refer to something as a "windfall profits tax" because they don't understand the difference is not a wise rhetorical choice.

A corresponding tax by the federal government would charge oil companies only increased royalties for oil extracted from federal reserves. The tax would not be levied on refining operations, or retail sales, or anything else the companies do. The US does extract royalties from oil companies, both financial and in-kind. Do you believe that it was the Petroleum Fairy who put 700 million barrels of oil into salt domes in Louisiana and Texas?

Because the tax is a function of pumping the oil out of the ground, and not what the oil companies do with it afterward (refining, sales, shipment to other markets, etc.), the Alaska severance tax is very different than a Windfall Profits Tax. Taxing the profits of oil companies rather than the nonrenewable product they extract (what Alaska does) means that what XOM does in Nigeria or Malaysia is subject to US taxes.

Alaska does not tax BP for its operations worldwide, only for the oil it extracts from Alaska's reserves. Once it's pumped, the Alaska tax stops.

See the difference?

Funny enough, it took me a 15-second Google search to find out it was the Clinton Administration that waived price triggers to increase royalties in Gulf of Mexico leases offered from 1996 to 1998, and the Bush Administration who argued to reinstate higher royalties.

Counterintuitive, I know. But nevertheless true. Like the difference between a severance tax and a windfall profits tax.


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