Big Oil profits part of a big issue

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By The Staff

Dear Editor,

The column of April 1 bemoaned the record-dollar profits of Big Oil companies and their continued tax breaks. At first glance, these figures do seem obscene; however, looking at the 2007 finances of the biggest of these companies (Exxon-Mobil), interesting details emerge. As a percentage of gross revenue, the company made a net profit of 10 percent, while paying taxes at a rate of 42.3 percent of its gross income. The average net profit for this particular energy sector is just over 8 percent and is in line with the average of American businesses. The prosperity and retirement holdings of millions of people are dependent on just such (average) profit margins. Why not then increase the tax rates on these companies (also equivalent to those paid by other U.S. companies)? U.S. companies pay the second-highest corporate income tax rates of all 30 OECD countries. Studies show that countries with lower corporate tax rates reap more foreign direct investment from U.S. companies. Thus, more jobs are likely to leave the U.S. Ironically, the much-criticized tax-cutting legislation during the Bush presidency has left corporate tax rates unchanged.The article also alluded to these profits contributing to the cost of gasoline. I couldn’t find current data for New Mexico, but the California Energy Commission quotes the statewide average being an eye-popping $3.61/gallon. Nearly 70 percent is due to crude prices. When looking at the price of gasoline in March 1981 ($3.39 in today’s dollars) versus that of the present, prices are not so out of line.If higher crude prices are the main cause of our higher gas prices, then why has this been happening? Much has to do with developing countries getting richer and, as they wish to increase their standards of living, creating more demand for oil. But we also contribute significantly to the problem. In the U.S., our fraction of the world’s population (5 percent) consumes 25 percent of the total oil output. Meanwhile, the global supply has not increased to match the increasing demand, leading to a basic recipe for higher prices. As prices continue to rise, we may have to emulate our European cousins (gas there is 2.5 times higher) by resorting to increased use of public transportation and more fuel-efficient means of personal transport. However, both of these options require seismic-like shifts both in American attitudes toward their use and in governmental policies to promote and subsidize them.Paul ArendtLos Alamos