Wednesday, November 09, 2005

Oil Company Profits

As an oil industry professional with over 35 years experience, I baulk at the US Senate calling in the chiefs of the oil industry to have them explain their "huge" profits. The irony of this trial by committee is that the US Government has benefited enormously from corporate income tax revenue derived from these profits, not to mention the chunk of change they collect from every gallon of gas sold. Yet it is these politicians who seek to publicly deflect any criticism from themselves toward the industry.

It is not as though the oil industry always makes a profit. Not so long ago low oil prices funded several spurts of economic growth. The longest of these was during the Reagan years when low oil prices from 1983 to 1990 created the impetus for unbridled growth and greed. During that time real estate in places like San Francisco went on a rampage. In Houston there was a major slump in real estate (it could be argued there still is).

So it is reasonable to assert that the oil industry not only provides a major slice of tax revenue when it is profitable, but when it is not it is still supporting the economy at large. Sounds like a goose with the golden egg. Needless to say, the US Senate like killing geese just to demonstrate their power to the people they represent.

None of this is unique to the US. In the UK the North Sea has funded social programs for years, helping Margaret Thatcher to dig the economy out of its 1970s hole (not that she ever paid homage to that). In Canada it seems that Alberta's oil, gas and bitumen reserves are and will be the underpinnings of a huge socialist agenda. And in all cases the politicians just love to criticize the oil industry while reaping the benefits of their tax policies.

Postscript: The government worries about huge oil company profits in the order of billions of dollars; I worry about government spending in the order of trillions of dollars. In case those senators don't know it, one trillion is a thousand times larger than one billion!