Home > Frac > Can We Afford to Forget the Benefits of Oil and Gas?

Can We Afford to Forget the Benefits of Oil and Gas?

January 24, 2012

As Senior Fellow of the Manhattan Institute, Robert Bryce reports:

“The U.S. consumes about 24 trillion cubic feet of gas per year. From 2005 to 2008, the years just before the shale revolution began, U.S. natural-gas prices averaged about $7 per million Btu. On Friday afternoon, the spot price for natural gas was about $2.37. If we assume the current price is $4 below what prevailed in the years prior to the shale revolution, low-cost natural gas is now saving American consumers about $263 million per day.”

$263 million per day in savings.

That’s $95,995,000,000 a year.

Over a three year span, that’s $287,985,000,000 or $986.06 per person with a population of 307 million people.

If you cut down this number to an estimate of those actively involved in the workforce including folks ages 20-64, a number of 182,549,800 or 182.5498 million, that number is $1577.56 for the people that earn the majority of the money in the United States.

With an average annual income (disposable, meaning after taxes) of $36,808, and a savings per year, per person, of $525.85 dollars, this amounts to an iPad2, each year, for roughly everyone with a job.

This is a consideration of Natural Gas prices as a result of the Shale Boom.

On June 29th, 2011, President Obama (the man who just punted the Keystone XL pipeline and then blamed Republicans) gave a speech wherein he said:

“There’s been a lot of discussion about revenues and raising taxes in recent weeks, so I want to be clear about what we’re proposing here.  I spent the last two years cutting taxes for ordinary Americans, and I want to extend those middle-class tax cuts.  The tax cuts I’m proposing we get rid of are tax breaks for millionaires and billionaires, tax breaks for oil companies and hedge fund managers and corporate jet owners.”  “[I]f if we choose to keep tax breaks for oil and gas companies that are making hundreds of billions of dollars, then that means we’ve got to cut some kids off from getting a college scholarship,” said Obama. “I think it’s only fair to ask an oil company or a corporate jet owner that has done so well to give up a tax break that no other business enjoys.”

Obama claims that Oil and Gas Companies get tax breaks and wants to “get rid of” those tax breaks.

This brings me to the reasoning behind why I wrote this article. I think this administration’s ignorance (or intentional misrepresentation) of the Oil and Gas Industry’s benefits undermines their role in the health of our economy.

The top three Oil and Gas Companies in the United States (Exxon-Mobil, ConocoPhillips, and Chevron) paid a combined $42.8 billion dollars of income taxes in 2010.

Exxon-Mobil made $52 billion and paid $21.6 billion or 45%.

ConocoPhillips made $19.8 billion and paid $8.3 billion or 42%.

Chevron made $32 billion and paid $12.9 billion or 40%.

The statutory tax rate for corporations is 35%.

Exxon-Mobil is paying nearly half in income taxes worldwide.

As cnsnews.com reported (pardon the lengthy quote)

ExxonMobil’s total tax bill, worldwide, was $89 billion in 2010, comprised mostly of sales and excise taxes. ConocoPhillips, for comparison, paid an additional $16.8 billion in “other taxes” beyond its income taxes, reported Forbes, and Chevron paid an additional $18.2 billion in “other taxes” in 2010.

According to the American Petroleum Institute (API), oil and natural gas companies employ 9.2 million Americans and account for 7.5 percent of GDP. Those companies added about 2 million jobs to the economy between 2004 and 2007.  As of 2010, the five largest American oil companies employed a combined 245,390 people.

The API further reported that in 2010, oil and natural gas companies averaged a net profit of 5.7 cents per dollar of income. Also, an average of 49.5 cents of every dollar oil companies made in 2010 went to income taxes.

According to a May 2011 report by the accounting firm PricewaterhouseCoopers, the 9.2 million American jobs supported by the oil and natural gas industry translates into 5.3 percent of U.S. employment. Some of those industry jobs include 900,000 in California; 275,000 in Pennsylvania; and approximately 250,000 in New York.

The oil and gas industry also generates $533.5 billion in labor income, which equals about 6 percent of U.S. labor income, according to the study. The value added to the U.S. economy by the oil and natural gas industry is $1.1 trillion (7.7 percent of GDP), according to PricewaterhouseCoopers.

In 2010, the oil and gas industry spent roughly $275 billion on capital projects and since 2000, the industry has invested $2 trillion in American capital projects in resource exploration, acquisition, research and alternative energy moving America towards energy independence and cleaner energy, according to API.”

Oil and Gas are peerless in their ability to generate jobs and money for the United States, and with the amount of taxes that they pay, they are one of the largest supporters (literally) of the American Government. Not only are they companies “making hundreds of billions of dollars”, they are paying an upwards of 40% on those hundreds of billions of dollars.

According to the latest Gallup poll that asked the question “What worries you most about the National Economy?”, Americans answered in this order:

1.) Jobs/Unemployment 26%

2.) National Debt and Deficit 16%

3.) Continuing Economic Decline 10%

4.) Outsourcing Jobs Overseas 6%

5.) Obama not doing a good job 5%

The top five replies deal with issues that Oil and Gas are working hard to counteract.

The top five issues voiced as concerns for those who decided to answer the Gallup poll can be greatly and positively influenced by the Oil and Gas Industry. O&G creates new jobs and sustains old jobs, pays high taxes, remains profitable without government dependence, while creating those jobs at home here in the US.

These facts are all worth noting, particularly when the concerns listed in the Gallup poll are all a result of economic decline. O&G is growing in the midst of decline. We shouldn’t be able to forget that nor should we be in the business of forgetting who the winning horse in the race is…it’s home produced Oil and Gas.

Oil and Gas, simply put, has too many benefits to overlook in determining the direction in which this country will go. They are already too big a part of our way of life both in the forefront and behind the scenes.Policy needs to reflect a strategy that enables and empowers a successful industry like ours to continue to thrive. As of right now, it looks like policies are attempting to “bite the hand that feeds them”. That’s a bad move. If we trend in a direction for unnecessary regulation that stifles O&G, we may have to forget the benefits because there will be none. Destroying the ability for Oil and Gas companies to continue producing by enabling the demand to be met by homegrown energy will continue to add to the tax base by increasing jobs and thereby increasing spending.

We can’t afford to forget all of the benefits because of the relatively miniscule complications that arise as a result of production. That would literally be economic suicide.

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