Lately, President Obama has been bragging about the drop in America’s dependence on foreign oil—now less than fifty percent. Earlier this week, he introduced a new chart to show how oil imports have declined under his leadership. The chart does not show the drop in America’s oil consumption, due to the bad economy. Nor does it give any indication of the trend for the future based on his policies—which will likely lead to increased use of foreign oil.
President Obama’s energy policy is largely set by his environmental base that favors “alternatives” and eschews fossil fuels—especially drilling for oil. His policy mirrors that of California where the resistance to tapping the resources under the residents’ feet has resulted in increased imported oil from the Middle East. Once the largest oil producer in the world, California is now importing nearly 50% of its oil—with about 21% coming through the Strait of Hormuz. California’s gas prices are routinely the highest in the country. If Iran closes the Strait, as they’ve been threatening, California will be in dire straits.
While less dependent on Middle Eastern oil than California, the United States is like California, in that we have vast resources that are locked up due to regulation, blocked access, and delayed permitting. President Obama touts the reduction of imported oil, but his bragging rights may be short-lived, if he continues on the same anti-drilling track California has been on.
Gasoline prices are driven largely by the headlines. They are full of talk about Middle East unrest and devoid of American drilling announcements. Hence, fear over future supplies keeps bumping the price up and up.
Add to that the President’s planned punishment of the companies that do produce oil in America.
The high gas prices are pushing the President to deflect blame. The oil companies are his favorite target. He points to their profits and wants to single them out for tax increases—which will only add to gas prices.
If you only hear part of the picture, the numbers do sound like the oil companies are stealing. But, perspective is needed. Take ExxonMobil. As one of the biggest publically traded oil companies in the world, it is an easy target. While the company’s oil reserves only account for 1% of the world’s total, it is an American company, whose $9.6 billion in earnings sound astronomical—until they are put into perspective. And, that perspective includes looking at what would happen to the struggling American economy, if ExxonMobil succumbs to the pressure and, like a whipped puppy, it crawls away to a more welcoming country.
ExxonMobil’s overall contribution to the economy through taxes, salaries, investment returns and business expenditures is more than seven times its earnings: $72 billion that governments can use to fund vital services, companies can use to hire workers, and investors can use to save for, or fund retirement.
According to the data, ExxonMobil’s economic contribution breaks down this way:
· $29 billion to investors in the form of dividends and share buybacks. Investors of oil and gas companies include teachers, government workers and other public-pension holders, as well as the millions of Americans who invest in IRAs or mutual funds.
· $19 billion in goods and services related to running U.S. production, manufacturing and office facilities, including payroll to more than 30,000 U.S. employees.
· $12 billion in capital spending, which goes to contractors, construction companies, raw materials and other spending on goods and services related to its U.S. oil, natural gas and chemicals activities.
· $12 billion to local, state and federal governments in the form of taxes and duties.
And these numbers are from just one company. While it is the largest American oil company, ExxonMobil only accounts for about 5 percent of US oil and gas production. Other major contributors include Chevron and ConocoPhillips. Imagine what the numbers could look like if American resources were opened up.
Looking at the complete picture, it is clear that the oil and gas industry is a major contributor to the US economy. Making “decreasing our dependency on oil” the goal of the Administration’s energy policy is bad for the economy.