The case for lower energy taxes.

Going after US based oil companies is perhaps the most feckless idea I have ever heard. This country needs to become energy independent and handicapping the leading investors in US energy indepence is a ignorant solution to a complex problem.

Oil companies are leveraged risky companies that put thier capital on the line to make profits. Leverage is defined as use of debt to make large investments. When profitable leverage creates larger returns when unprofitable leveraged companies go bankrupt. Taking risk sometimes does not work out, one reason Enron is in court today is due to their speculation that prices would go up in the short term. True, the oil companies have been making a lot of money because price and demand is up.

An ironic fact is the federal goverment also benefits from high prices because of the taxes it charges the oil companies. Last quarter Exxon Moble had energy related sales of $86 billion ,thats pretty impressive. However, as it turns out oil is not that profitable an investment despite the huge volume of sales. XOM's profits before income taxes are roughly 14 billion (taking out the compay's profits from non oil related activities). XOM makes roughly 14 cents on every dollar of sales before taxes. By comparison Microsoft makes 43 cents on every dollar of sales; in other words Microsoft is 68% more profitable. Moreover, Chuck Schumer's largest campaign contributer Goldman Sach's makes 50% more on every dollar of its sales as Compared to EXXON. The federal goverment made more from high energy prices than EXXON has because it taxes EXXON's products and profits. Exxon is faced with a 45% income tax rate which means the goverment collects from Exxon shareholders 45 cents from every dollar Exxon's profits.

The goverment also collects income taxes from Exxons employees and charges consumers tarrifs and use taxes on the gas and fuel oil consumers purchase at the gas station. For example, durning the last quarter the federal goverment collected a total of $16 billion dollars in income taxes and duties from EXXON and shareholders recieved just $6.5 billion. Perhaps a wind fall tax cut from the goverment is more in order. In conclusion, we the people need the US based energy companies if we are going to migrate to other fuels because the current Oil distribution system is supper efficient and can be redeployed to distribute any type of fuel including bio diesel, eythenol or hydrogen.

Going after US based oil companies is a strategic mistake an will hurt the long term intrests of the US. On solution is to tax foriegn owned oil companies. Russian and Venezuelan owned oil companies have access to OIL at a cost of $6 per barrel and perhaps CITGO and GETTY should be taxed at higher rates to compensate American consumers and promote alternative fuels.