by Ralph Lawrence

Created on: April 07, 2008

FASHIONABLE FARCE

This April Fools day, appropriately, the Congress of the United States invited the management of the five largest oil companies to come to Capitol Hill to give testimony about the significant increase in the profitability to their bottom lines. Some rhetoric called these gains obscene. Inflamed oratory spoke to the plight of the ordinary citizen, who suffered mightily from this windfall profit that oil companies were reaping mainly on the backs of the people. So much for the American dream! How do we haul our business leaders before committees to justify making profits, which happens to be their job? We need to examine in depth the "gouging" characterized so vociferously by several committee members.

The Exxon Corporation's $40 billion profit for 2007 was the largest in corporate history. Yet they paid $100 billion in taxes and royalties. Exxon's profit margins are slightly under 11%. This compares with about 26% profit margin by Microsoft Corp. Are we going to pass a windfall profit tax on Bill Gates and his gang? I really doubt it. Exxon employs over 107,000 people. And it pays out about 20% of earnings in dividends. Much of this dividend goes into 401K plans and IRAs for retirement.

Let's examine a mythical gallon of gasoline. For illustrative purposes, we shall assume a $3.00 cost per gallon. The approximate breakdown for 2007 was:
Oil companies $1.65
Refiners .66
Gas stations .12
Federal & State taxes .57

TOTAL $3.00 per gallon.

The average oil company makes ten cents (.10) per gallon on gasoline. Yet our champions in government who are always fighting for the working man charge us fifty-seven cents (.57) in taxes. So to whom can we attribute "gouging"? Ten cents a gallon to Exxon or fifty-seven cents a gallon to the federal and state lawmakers to line its coffers! If Congress wishes to help Joe or Mary Everyday, then cut federal spending and cut the tax on gasoline.

America is addicted to oil. The USA imports more than 10 million barrels of oil daily. Likewise, our demand for gasoline, jet fuel and diesel is equivalent to about 10 million barrels. So transportation fuels encompass every barrel we import. At $3.00 per gallon, we can safely estimate that, using 140 billion gallons each year, our bill from imported oil is $420 billion yearly. Not included in that huge amount is our budget expenditures allocated to trying to secure the Middle East and its vast oil reserves.

One has to wonder if we, as a nation, could make a commitment like President

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