Tuesday, December 15, 2009

Why Would Hillary Tax Wall Street Banks & Oil Companies, Her 2 Biggest Contributors?

the Robinhood method, it the best way.The Middle class is hurting,and the rich can pay more.Why Would Hillary Tax Wall Street Banks %26amp; Oil Companies, Her 2 Biggest Contributors?
Because it's the right thing to do.





See Hillary doesn't just look out for herself like Obama does.Why Would Hillary Tax Wall Street Banks %26amp; Oil Companies, Her 2 Biggest Contributors?
The cost of doing business, including taxes, always roll up to the cost of the product or service being sold. Increased tax burdens on oil companies will result in higher prices, there is no getting around that. I have heard a lot of talk about eliminating oil company tax breaks as a means of reining in the price of gas, but my first question would be, what tax break are you referring to?





According to the RIA Federal Tax Handbook for 2008, here are the oil company specific credits:








Enhanced oil recovery credit 鈥?15% of qualified costs. Credit completely phased out in 2007





Marginal well production credit - $3 per barrel (there are 42 gallons to a barrel, equating to $0.07 per gallon) but it is limited to only 1095 barrels. Phases out if the price of crude exceeds $18 adjusted for inflation.





Nonconventional source fuel production credit - $3 per barrel of oil-equivalent gas from biomass or synthetic fuel made from coal. Credit phases out as price of oil increases and is adjusted for inflation. In 2006, this credit was reduced to $2.31.





Gasification project credit for refiners 鈥?20% of qualified investment in advanced coal projects or 15% in other coal based generation technologies. Does not help oil companies much.





Alcohol fuel credit - $0.45 to $0.60 per gallon. This applies not to oil companies, but to producers of ethanol. By federal mandate, oil producers are required to use ethanol in the production of gasoline.





Low sulfur diesel fuel production credit 鈥?As an incentive to oil companies to help clean the environment, small business refiners can claim a credit of $0.05 per gallon of low sulfur diesel produced to a maximum of 25% of qualified costs. Credit phases out starting at production levels exceeding 155,000 barrels a year.





So what are we talking about here? Seems to me that industry specific credits are pretty mild, all told. Why do oil companies make so much money, then? Look at Yahoo Finance.





Exxon Mobil (XOM) made a net income of $11.6 billion in the quarter ended December 31, 2007. But that was on sales of $116.6 billion, meaning they made a 10% return on sales. By comparison, Microsoft (MSFT) made a return of 31%. Apple (AAPL) made 17%. Pepsi (PEP) made 13%. You go through every major company, any industry, and you can see similar results. Companies that are making huge net incomes are doing so because they are selling huge amounts of products and services.





If you look at what goes into the cost of a gallon of gasoline, as presented by the California Energy Commission, As of April 28, 2008 at $3.89 a gallon, the costs were as follows:








Distribution Costs, Marketing Costs and Profits $0.09


Crude Oil Cost $2.83


Refinery Cost and Profits $0.31


State Underground


Storage Tank Fee $0.01


State and Local Sales Tax $0.29


State Excise Tax $0.18


Federal Excise Tax $0.18





The government at all levels made $0.66 per gallon, or 17% of the total price. The biggest cost, the crude oil price, accounts for about 73%.





From this analysis, I think the best way to lower gas prices is to go after the largest cost, meaning the crude price. How to you lower crude prices? The price of crude includes the cost of exploration (including exploration that failed to find anything), drilling, and the infrastructure needed to get that oil to the refinery (via pipeline or tanker). If you want cheaper oil, you need to get more oil on the market.





There are a number of things that can be done about gas prices. The problem is that there are political, environmental, and legal issues that would have to be overcome to make it happen.





First, we need to reduce dependence on imported oil. As a world wide commodity, changes in oil demand anywhere in the world will impact our prices here. We could reduce oil imports by increasing the use of ethanol. Currently something like 25% of the US corn crop goes to this. However, the downside is that this takes corn out of the stockpile for food (both human and animal feed), which is currently causing famine to break out around the world. We could expand domestic supply, but hat means drilling for oil off the Gulf coast and in a part of ANWAR, which has environmentalists up in arms.





Second, we could improve the distribution of fuel in the US. Currently, there are dozens of gas blends, all mandated by law. It is a tricky thing to supply just enough of each blend, as you cannot use a blend intended for, say, Colorado, in California. So if California goes in need, oil companies cannot shift inventory, they have to shut down refineries, make adjustments, and make more of the California blend. This is a wasteful and expensive process. Far better to have a single blend that all the states can agree on that would allow the fluidity needed in the market. But this is going to be difficult to impossible as the states want THEIR blend and will fight any kind of Federal mandate.





Third, I think we need to encourage those things which will get us away from oil consumption. Not much oil is used for electricity generation, but it can and should be replaced by more efficient, cleaner sources. But nuclear, coal, solar, wind, and hydroelectric all have their own problems as well and each industry will fight hard for their slice of the pie. Most oil is used for vehicle fuel. We need to move to more efficient vehicles and alternative fuel / hybrids, but they are often more expensive than gasoline powered vehicles and some alternate power sources do not have the power necessary for today鈥檚 driving. Research needs to be done in fuel cell technology, advanced batteries, and efficient (and safe) hydrogen generation.





I think too many people focus on one thing (conservation, more oil drilling, whatever) and think that alone will solve our problem. They are wrong. It will take a comprehensive approach were everyone will have to give a little for the greater good. Rep. Kennedy is going to have to sacrifice some of his coastal view in MA for wind turbines. Oil companies must be allowed to develop domestic sources. States are going to have to grant the feds the power to set uniform fuel standards. This is a lot to ask for, but this and more is what it will take. Anything less then an across the board rethinking of our energy policy will be like slapping a band-aid on a cut artery; just too little to be effective. And if it is ineffective, then expect the President of Iran to be correct when he says that oil is a strategic resource that needs to find its true (and in his mind MUCH higher) price. This is the guy that thinks $200 a barrel for oil is not unreasonable.

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