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Politics : Politics of Energy -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (1001)	7/30/2008 5:45:28 PM
From: TimF	Respond to of 86352

Oil companies send more money to the government than the government sends to them, that's even counting tax breaks as "the government sending money to them", even though it isn't, and not counting taxes on refined oil products (because they are not paid directly by the oil companies. Oil companies are not making money hand over fist because of government subsidies, but because of the balance of supply and demand in the oil industry. Get rid of all the subsidies and let's see how competitive they are. Against some of the alternatives you have been pushing they would be more competitive than they are now.

To: RetiredNow who wrote (1001)	7/30/2008 6:22:57 PM
From: Brumar89	Respond to of 86352

I think someone posted a number of $13B for oil company "subsidies". Lets take that at face value and assume its accurate. Now just think a bit about the scale of the oil industry. We use around 20M bpd. 7,300M bfl per year = 7.3B bbl. Price that at $100 / bbl. Guestimated revenues for industry then would be $7.3 trillion. Per recent news articles the average profit on sales in the industry has been a little under 10% and the recent years h/b good ones. So you're talking somewhere up near $700B profits. Wow, these are big numbers. Now, if $13 B went away, does it crush the industry? Pretty clearly no. And a couple things more to consider - that $13B are mostly deductions which they'd get anyway, the subsidy is that they get to deduct things sooner than normal. The second thing to consider is the above $7.3 trillion estimate - thats only calculating based on crude oil bbls. That $13B covers both oil AND natural gas. And I didn't even estimate revenues for natural gas. That would just make more trillions, I'd guess. The $13B subsidies I think is tilted heavily to natural gas. Immediate deductions of intangible drilling costs is probably the biggest "subsidy" item and we drill a whale of a lot more gas wells in the US than oil wells. So that $13B, most of it probably belongs to the natural gas side of the industry.