Big Oil Subsides

[essence]

CJ7 I looked at teh other link. One of the biggies in there is the following:

The Expensing of Exploration and Development Costs Credit allows investors in oil or gas exploration and development to “expense” (to deduct from their corporate or individual income tax) intangible drilling costs (IDCs). IDCs include wages, the costs of using machinery for grading and drilling and the cost of unsalvageable materials in constructing wells. These costs are “intangible” in comparison to costs for salvageable expenditures (such as pipes or casings) or costs related to acquiring property for drilling. The credit enables oil and gas producers to immediately write off as an expense these costs from income taxes rather than amortize them (spread the deductions out) over the productive life of the property.
This tax credit, intended to encourage domestic oil and gas exploration, was originally implemented through federal regulations in 1916; it became law in 1954. The Congressional Research Service has estimated that the Expensing of Exploration and Development Costs tax credit was worth $1.1 billion to the oil and gas industry in 2006.

This seems perfectly fair to me, as I explained above. Normal plant does not get lost, whereas it is a risk for the drilling business, so different accounting procedures. What is the problem? The other things like wages, cost of drilling etc. are just normal business expenses. What is the problem?

Plus, at the end of the day, $1.1 billion is a drop in the ocean for the oil industry. Do any of you know what it costs to build and commission a deep sea platform in Gulf of Mexico or similar?

[Jackie S]

That last sentance says a lot about how companys in general think.

The problem is, most polititians are ignorant of how the real world of business operates. That includes the current President and most of Congress.

[essence]

Originally Posted by Jackie S

That last sentance says a lot about how companys in general think.

The problem is, most polititians are ignorant of how the real world of business operates. That includes the current President and most of Congress.

Can you explain a bit more? I'm not sure if you are criticising or supporting.

To take just one company ExxonMobil, in 2011:

Total revenue $486 billion

Earnings before interest and tax $73 billion

Net income $41 billion

So where does $1 billion fit into this?

More importantly, where do they spend all their money? Answer - on other services companies etc. And, what do those other companies do? Pay taxes.

I take a very simple view of tax. Every single dollar I earn will one day be fully paid in tax. The question is how rapidly that cycle churns. That is the problem with recessions.

People seem to have some idea that there is somebody at the top of ExxonMobil (or similar) who sits on a great pile of cash.

Where do you think your pensions and investments are held?

[essence]

Let me be completely naive, I am not an accountant, but...

revenue $486 billion

earnings $73 billion

so costs $413 billion

Assume the costs are paid to service companies, who, say, make 20% profit.

So their profit is about $80 billion.

They pay, say, 20% of the profit in tax.

That is $16 billion.

But the service companies pay wages, say $300 billion

Those wage earners pay tax, say 30%, which is $90 billion.

etc etc etc

so where is this $1.1 billion evil tax break?

[gnadfly]

Originally Posted by WTF

If any of you do not think big oil gets huge tax breaks then I wil pay you amillion dolllars when you br8ing me the head of bigfoot

Another big huff from WTF. I believe we are asking what these huge tax breaks are. Care to come up with something other than bluster?

Looking at the greenpeace link I'm very apprehensive about how they've arrived at their figures and what they consider a subsidy.

[essence]

Originally Posted by gnadfly

Another big huff from WTF. I believe we are asking what these huge tax breaks are. Care to come up with something other than bluster?

Looking at the greenpeace link I'm very apprehensive about how they've arrived at their figures and what they consider a subsidy.

It is very clear what Greenpeace consider a subsidy of the evil oil companies.

Wars.

Any business expense.

They are bonkers.

[CuteOldGuy]

Duh. Most, if not all, of our recent wars have been solely for the benefit of oil companies and the defense industry.

[Jackie S]

The daily operating cost of a single platform the size of Deep Sea Horizon is around $950,000.

Most people who bitch about oil Companies have no idea how expensive it is to drill in water that is up to 1000 ft deep. It isn't like that bunch of middle eastern Jed Clampetts who can dig a hole anywhere and come up with a gusher.

Incidentally, this crap about fighting wars for oil?? Give me a better reason.

[essence]

Originally Posted by CuteOldGuy

Duh. Most, if not all, of our recent wars have been solely for the benefit of oil companies and the defense industry.

I suggest you turn off you computer because you don't need evil electricity, and open your front door because you don't believe in security.

You have fallen into your normal trap (I have been easy on you the last few days) with the word 'solely'.

If you said that 'some recent wars have, in addition to liberating an oppressed people, had an effect on securing oil supplies to ensure the security of the Amercian Way of Life' then that is something which can be discussed.

'Solely' means it is beyond discussion.

Wars are solely to the benefit of the defense industry

is like saying

illness is solely to the benefit of the medical profession.


Yes, I know, the analogy is terrible, apart from the fact that both statements are clearly ridiculous.

To take just one example, because that is all it takes when you use the word 'solely'.

American war of independence was solely to the benefit of the defense industry.

CoG, I honestly thought you were showing signs recently of getting over your logic problems, but this latest post has displayed evidence of severe regression.

[CuteOldGuy]

Which recent wars haven't primarily benefitted the oil and defense industries? How has the security of the US been strengthened in any of our recent wars? Which companies have experienced huge profits they wouldn't have made if not for the wars?

Follow the money. It will show who the wars were fought for.

[essence]

It is possible to argue with you on the detail, but your main problem is to confuse cause and effect.

[CuteOldGuy]

Please. Enlighten me. Let's take Iraq. Why did we go there? The premise was phony. Is Iraq better off now? Maybe, for a short time, but it will return to its original state. Is the US better off? Hell, no. We are deeper in debt, and much less free than we were when the war started. Are the oil and defense industries better off? Well, yes. They have made tons of money off this war.

So please tell me how I am confusing cause and effect. I'd really be interested.

[BigLouie]

Originally Posted by gnadfly

Another big huff from WTF. I believe we are asking what these huge tax breaks are. Care to come up with something other than bluster?

Looking at the greenpeace link I'm very apprehensive about how they've arrived at their figures and what they consider a subsidy.

OK here is it. One tax break that I know of because I helped a company deal with it last week is section 199, the QAPI program. QAPI is equal to the business domestic production gross receipts (DPGR) from qualified activities minus expenses. Expenses such as cost of goods sold, direct and indirect costs and a ratable portion of costs all allocable to the receipts. All production must be conducted within the United States and is limited to 50% of all related W-2 wages paid for the production activities. Currently the break is 9%.

[gnadfly]

Thanks WTF.

A google search on QAPI brings up a bunch of nursing home regulation links. 9% is meaningless. Your post makes about as much sense as the greenpeace link. Do I believe the oil companies may receive some type of subsidies? Yes but the old man down the street gets SS and many people consider that a subsidy.

The issue is that BHO keeps quoting a $4 billion subsidy figure. Some people on this board just upped it to 10 billion. Show us where the $4 billion subs are. Source me the $10B number.

Its just like when BHO kept throwing out the $200 Billion in Medicare fraud number.

[essence]

Originally Posted by CuteOldGuy

Please. Enlighten me. Let's take Iraq. Why did we go there? The premise was phony. Is Iraq better off now? Maybe, for a short time, but it will return to its original state. Is the US better off? Hell, no. We are deeper in debt, and much less free than we were when the war started. Are the oil and defense industries better off? Well, yes. They have made tons of money off this war.

So please tell me how I am confusing cause and effect. I'd really be interested.

What you are describing is your view of the EFFECT of the war.

That is not necessarily the original CAUSE of the war.

Your first post on this issue was addressing the CAUSE of the war.

You said:

Most, if not all, of our recent wars have been solely for the benefit of oil companies and the defense industry

Now, the difference between cause and effect may have been lost by some readers, but when you use the words:

'have been', it is commonly understood to be a shorthand for 'have been instigated'. You can't use the conjugation 'have been' to mean 'has resulted in'. They are different conjugations.

[please bear with me, I did my Latin verb conjugations aeons ago.]

Some examples.

Wages have been increased for encouraging the employees.

v.

Employee morale has benefited from wage increases.

Two completely different statements.