Our chairman and CEO, Rex Tillerson, appeared yesterday with other industry executives at the Senate Finance Committee hearing titled “Oil and Gas Tax Incentives and Rising Energy Prices.”
Just from this title, you can see the issue at the center of this debate. Some in Washington are trying to connect industry taxes with gas prices; so, they reason that taking away legitimate, economy-wide tax deductions for ExxonMobil, Chevron, Shell, BP and ConocoPhillips will somehow make gas prices go down.
Despite what some in Washington would like you to believe, it’s clear that a tax hike for five oil companies isn’t going to bring down gas prices.
Oil companies don’t have the ability to control the price of crude oil, which is the single-largest component of the price at the pump (supply and demand in global markets set the price).
Oil companies aren’t able to control global events that account for fluctuations in the marketplace.
And, oil companies aren’t able to control the value of the U.S. dollar, which is weak and a factor in rising commodity prices across the board.
But what oil companies are able to do is invest in new energy supplies – if the policy environment allows them to. Developing new supplies can put downward pressure on prices, create more jobs, and raise government revenues.
However, the Administration, as well as several of the senators at yesterday’s hearing, have staunchly opposed domestic oil and natural gas production. They prefer instead to advocate for punitive tax policies that will have the opposite effect – reducing U.S. energy production and the jobs and government revenues associated with it.
Rex Tillerson drove home this point in his remarks yesterday:
Arbitrarily punishing five U.S. oil and gas companies by raising their taxes will generate far less government revenue than if we were allowed to compete and produce our nation’s resources.
An August 2010 Wood Mackenzie study estimates that approximately $10 billion to $17 billion in direct upstream investment in this country is at risk per year if the Section 199 and other tax provisions are repealed for our industry.
Another recent Wood Mackenzie study found that opening up federal lands that Congress has kept off-limits for decades could generate 400,000 new jobs by the year 2025. And another analysis shows that such actions could generate as much as $1.7 trillion in government revenue over the life of those resources.
The fact is that raising taxes on five U.S. oil and gas companies is simply not the way to reduce prices or raise revenue. Increasing these companies’ taxes would only discriminate against certain U.S. workers, make our companies less competitive against others who are in the same business that we are in, and discourage future energy investment in this country.
A much better solution lies in permitting our industry to increase energy supplies – including supplies found here in North America, such as oil and natural gas found off our shores and in our shale formations.
Access – not taxes – will enable us to meet the goals of increasing affordable energy supplies for Americans, strengthening U.S. energy security, and powering our nation’s economy forward.
You can read the full remarks on exxonmobil.com, and I’ll be talking more about this issue in the next few days.