The United States is at an historic turning point for its energy policies. However, many Americans lack a full understanding of the oil and natural gas industry and likely have misguided or misinformed perceptions. The discussion seems to have shifted more to an “either-or” notion of fossil fuels versus forms of renewable energy. Little talk has centered on how both can coexist in developing America’s energy policies of the future. The reality is that both broad forms of energy will be needed to power our economy and society in the years to come.
To encourage a constructive public-policy debate that leads to a new, fact-based comprehensive energy policy, we must actively address some of the misperceptions about the oil and gas industry. Simply, we must tell our story, or someone else will.
One of the biggest misconceptions out there is that the oil and gas industry profits more than any other industry.
Facts tell a different story. As a percentage of net income to sales, the oil and gas industry actually ranks seventh behind such industries as drug, Manufacturing, Tobacco and Beverage. While some are touting that executives from “Big Oil” are the only ones who stand to gain from industry profits, it simply isn’t true. According to EnergyTomorrow.org, only 1.5% of industry-wide shares are owned by corporate management. The rest are owned by tens of millions of Americans, many of whom are in the middle class.
In particular, a recent study by economists Robert J. Shapiro and Nam D. Phan found that 43% of oil- and natural-gas-company shares are owned by mutual funds and 27% of shares are owned by more than 2,600 pension funds representing, among others, retired soldiers, teachers, and police and fire-fighters.
Another misconception is that the oil and gas industry doesn’t pay its fair share of taxes. Again, facts say this isn’t true.
A significant portion of revenue earned by U.S. oil and natural gas companies goes to payment of taxes. U.S. oil and natural gas companies pay considerably more in taxes than does the average manufacturing company. According to the U.S. Energy Information Administration (EIA), the industry’s 2007 income-tax expenses (as a share of net income before income taxes) averaged 40.4%, compared with 26.7% for all U.S. manufacturing companies.
In addition, Congress has enacted tax laws during the past few years that are expected to cost the industry around $10 billion in additional taxes. This figure is dwarfed, however, by the Obama administration’s proposed FY2010 budget, which includes new taxes and fees on the oil and natural gas industry that could potentially total more than $400 billion during the next 10 years.
--Helen L. Leeke
About the author: Helen L. Leeke is vice president, market development, for Bolo, as well as liasing with marketing for WellPoint Systems. She previously was involved with acquisition-integration, system-implementation, business-process re-engineering, corporate reporting and internal-decision-support strategy for Marathon Oil Co. and Central Resources Inc. She can be reached at 713-850-1812, Ext. 401, and Helen.Leeke@wellpointsystems.com.