Tillerson outlines why energy tax increases would hurt jobs, competitiveness – and fail to reduce prices

The CapitolOur 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in direct upstream investment in this country is at risk per year if the Section 199 and other tax provisions are repealed for our industry.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.


9 Comments

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  1. John Weiglhofer says:

    This whole proposal of imposing different taxes for the oil and gas industry (that make about 6 cents for every dollar in sales that is also the average of all US industries) than for other industries like pharma or computers who make more than twice the profit of oil and gas industries misses one important point – the Constitution.

    Article 1, Section 8 of the Constitution states Congress shall have the power to tax and impose duties but it must apply those taxes and duties uniformly throughout the US. Penalizing efficient members of one industry while ignoring other industries who make more than twice the profit is clearly unconstitutional based on uneven tax discrimination.

    The oil and gas industry should push back all the way to the Supreme Court to prevent this erosion of the Constitution that was set up to prevent just this type of discrimination by the uglier, ignorant and vindictive side of our nature.

  2. John Weiglhofer says:

    Energy Secretary Chu has publicly stated that it is this administrations intention to drive the price of gasoline as high as it can go so that cost inefficient alternatives that require subsidies can “compete”.

    If the current administration succeeds in forcing the US into higher priced alternatives with the excuse that it removes our dependency on foreign oil, the following unintended result will occur if oil is still available to the rest of the world. By taking a significant portion of US demand out of the world’s oil supply network, oil prices will collapse for a long time.

    As the rest of the world, that are also our competitors, enjoy maybe one to two dollar gasoline, the US will still be paying much higher, perhaps two to three times higher alternative fuel costs. US costs of manufacture and labor will skyrocket as the US slips away into a third world nation status because it can never compete with competitors who enjoy a much cheaper energy supply.

    The excuse that the US wants alternative fuels to get away from foreign oil and deal with climate change issues is highly suspect when, in the face of the huge recent discoveries of tremendous amounts of recoverable oil and natural gas due to technological breakthroughs right here in the US, the administration turns a deaf ear and will not even discuss this tremendous piece of good luck for America

    The recent discovery of tremendous amounts of natural gas deals with climate change issues as it releases… read more »

    …significant less CO2 than other fossil fuels.

    So what is the motive of our current administration, get us off of foreign oil, deal with climate change or turn the US into a third world country?

    Clearly in my opinion, the actions and decisions of our current administration indicate that the first two motives are not as important as the last.

  3. James May says:

    Wow, I am surprised this site exists. Why does the American Plutocracy feel the need to make an attempt to influence the General Public? We know our opinions don’t matter, all you need to do is buy off a few politicians with your army of lobbyists and you will surely get whatever it is that you want. This website is more or less just lip service. All hail the one percent! The true owners of the American political system!

    • Radical Capitalist says:

      I think the rise of the Tea Party debunks your premise. An uninformed opinion doens’t matter – get educated and involved.

      • Kathleen Duke says:

        I hope you’re right, and I’m glad they’ve entered the ‘debate’ — it’s a very healthy thing for both parties. But they have a long way to go against our corporate-bribe-funded political process.

  4. Kathleen Duke says:

    You’re assuming that the tax monies collected wouldn’t be used to stimulate the economy in other ways, which is a silly assumption.

    I have no problem with fair taxes across industries, but then you’d better be ready to give up your exploration & development tax benefits, and your oil spill clean up cost tax credits.

    No other industry in this country, that I’m aware of, gets a tax credit for just doing its job and/or cleaning up its messes.

    Sorry, but I think the tea party owns this issue — they’re against new taxes. But when they find out about oil & gas tax credits and subsidies, they’ll be against them, too. And rightly so. Every industry employs people; no industry “needs” federal tax coddling.

    By the way, use of inflammatory language like “punitive” destroys your credibility. Do I, as a software consultant, get to call global trade “punitive” just because it forces me to be more competitive?

    Please post this banner over your mirror: “Political Hack”

    • Sam Sweatt says:

      The Oil and Gas Industry has done a poor job in educating the general public on exactly what all goes into producing a gallon of gas that we so readily take for granted. WE all expect the lights to come on when we flip our switch each morning and we give little thought as to what has to happen before we enjoy our first cup of coffee.
      It has always been my wish that the industry that drives our entire economy would be more open to share the research needed, the technology, the logistics, the cost of production, the monetary investment needed, the risk of production failure, the cost of maintaining production, the overwhelming obstacles inherent in every venture, the amount of taxes paid, the number of jobs afforded, the effort taken to ensure safety, and the day to day operations that must take place before that gallon of gas has reached us, the consumers. The idea that we can replace hydrocarbons as our main fuel source, with just the suggestion of such, is pure ignorance. We can certainly incorporate more eco-friendly procedures the help lessen the need for oil and gas, but by no means is it possible to grow enough corn, or harvest enough wind to replace it. Should we be forced to do that by increasing the cost per gallon, please let it be known who is driving that bus. Who can honestly think that is a good idea? Let’s complain about the price per gallon… read more »

      …and then raise the price to keep us from complaining further.
      In moving forward, please share the data. Please educate us. Please share with us all the good things that happen when we produce our own energy. Let us ALL be responsible and make informed, well thought out decisions. It will take some doing to convince the public to be more interested in our energy production process verses who wins American Idol, but if you can get gas production from a shale formation, you can do this as well. I am sure of it.

  5. Kermit Robinson says:

    Shocking the number of people who just dont get it. The oil and gas industry is just an industry, providing jobs to millions while helping the US.
    There are no “tax loopholes.” There are only benefits given toAALL corpoations through the tax code to promote that which Congress chose to promote, like capital expenditures and tax depreciatiosn thereof. Shocking that the general population knows only talking points, like the oil companies are making huge profits. I remind you that, if they make huge profits, they necessarily pay huge taxes at some point. Profits are a good thing
    ! I also remind you that there is no amount of tax percentage increases that can dig us out of this deficit hole. You can tax all the millionaires at a 50% rate and you dont get even close to closing the hole. Only revenue, profits, and taxes resulting therefrom can close the hole. But why waste my time discussing this. The U.S. as i knew it is gone and never to come back. Uneducated and moronic population with heads filled with talking points, actually believing what comes out of the mouths of your Congressmen of choice, Republican or Democrat. They all speak nonsense, merely to gather votes from the uneducated population. No, there are no evil “tax loopholes.” Adn yes, corporation actually do leave the U.S. and have left in droves. Intel has double the numberof … read more »

    …plants overseas that they have in the U.S. Go ahead, rasie corporate taxes and see what happens.

  6. Jim Anderson says:

    One we are not raising taxes on the oil industry we are eliminating incentives for the industry to improve itself. Yet we do not have enough refineries. The subsudies where there to make it more economical to find and remove new reserves. But now you are making tons of profits that should be used to keep your business going not my tax dollars. In essence I am being taxed so you can make a buck. Where is the return on my tax dollar investment.

    It is also interesting that you have not mentioned conservation of our resources (I know conservation will not eliminate the need for petro) nor have we thought about making stides into alternative energies (not natural gas). Wouldn’t it be great if you started making solar panels available to all the residents in the U.S., if you did that you could keep your tax incentives I would be getting a return on my tax dollar.

    Nope not going there rather go for the natural gas out west with no environmental regulations, thank you mister chenny/bush.

  7. John Weiglhofer says:

    This whole proposal of imposing different taxes for the oil and gas industry (that make about 6 cents for every dollar in sales that is also the average of all US industries) than for other industries like pharma or computers who make more than twice the profit of oil and gas industries misses one important point – the Constitution.

    Article 1, Section 8 of the Constitution states Congress shall have the power to tax and impose duties but it must apply those taxes and duties uniformly throughout the US. Penalizing efficient members of one industry while ignoring other industries who make more than twice the profit is clearly unconstitutional based on uneven tax discrimination.

    The oil and gas industry should push back all the way to the Supreme Court to prevent this erosion of the Constitution that was set up to prevent just this type of discrimination by the uglier, ignorant and vindictive side of our nature.

  8. John Weiglhofer says:

    Energy Secretary Chu has publicly stated that it is this administrations intention to drive the price of gasoline as high as it can go so that cost inefficient alternatives that require subsidies can “compete”.

    If the current administration succeeds in forcing the US into higher priced alternatives with the excuse that it removes our dependency on foreign oil, the following unintended result will occur if oil is still available to the rest of the world. By taking a significant portion of US demand out of the world’s oil supply network, oil prices will collapse for a long time.

    As the rest of the world, that are also our competitors, enjoy maybe one to two dollar gasoline, the US will still be paying much higher, perhaps two to three times higher alternative fuel costs. US costs of manufacture and labor will skyrocket as the US slips away into a third world nation status because it can never compete with competitors who enjoy a much cheaper energy supply.

    The excuse that the US wants alternative fuels to get away from foreign oil and deal with climate change issues is highly suspect when, in the face of the huge recent discoveries of tremendous amounts of recoverable oil and natural gas due to technological breakthroughs right here in the US, the administration turns a deaf ear and will not even discuss this tremendous piece of good luck for America

    The recent discovery of tremendous amounts of natural gas deals with climate change issues as it releases… read more »

    …significant less CO2 than other fossil fuels.

    So what is the motive of our current administration, get us off of foreign oil, deal with climate change or turn the US into a third world country?

    Clearly in my opinion, the actions and decisions of our current administration indicate that the first two motives are not as important as the last.

  9. James May says:

    Wow, I am surprised this site exists. Why does the American Plutocracy feel the need to make an attempt to influence the General Public? We know our opinions don’t matter, all you need to do is buy off a few politicians with your army of lobbyists and you will surely get whatever it is that you want. This website is more or less just lip service. All hail the one percent! The true owners of the American political system!

    • Radical Capitalist says:

      I think the rise of the Tea Party debunks your premise. An uninformed opinion doens’t matter – get educated and involved.

      • Kathleen Duke says:

        I hope you’re right, and I’m glad they’ve entered the ‘debate’ — it’s a very healthy thing for both parties. But they have a long way to go against our corporate-bribe-funded political process.