Oil industry looking a little less 'big and greedy'

The oil and gas industry is so easy to criticize. After all, it is profit oriented and seemingly controlled by greedy corporate giants. Consumers are disgusted with the amount of money they funnel every week into their gas tanks. All this public animosity makes it an easy target for legislators to tax when they need to balance their budgets.

However as big and greedy as oil companies seem, this is just not the case. In fact, the oil and gas industries operate on very thin margins, primarily because oil and gas prices are dictated by the international market. Additionally the vast majority of America’s oil and natural gas is produced by small, independent operators and are not the big, nasty, global corporations that consumers believe them to be.

When you take a look at who owns the big companies, you will find that pension funds own 27 percent of them; regular, individual investors own 23 percent; and IRAs own 14 percent. This means that those consumers who own a pension fund or IRA could very well own part of an oil company. So on second glance, it appears that more people than just industry CEOs have stakes in oil profits.

So when President Obama proposes more taxes on this industry — as he does in his budget proposal — many Americans have a lot to lose.

One of the most burdensome items he proposed is the repeal of Section 199 of the tax code. Section 199 is a tax credit for manufacturers and if repealed, American energy producers’ already expensive operations will become more expensive. This will lead to job cuts as well as the loss of much-needed revenue, especially among those small, independent oil and gas operators. It will also cause prices to go up at the pump for American consumers — something we surely do not want to see in this economy with high unemployment and families struggling to meet financial needs.

New taxes on our domestic energy industry unfairly target U.S. refineries — thereby creating a competitive advantage to foreign competitors who are not subject to these taxes. A study by the Energy Policy Research Foundation finds that “foreign refiners are so entrenched in the domestic gasoline market that they are directly linked in a competitive battle for a share of the U.S. products market.” Raising prices on our producers makes no sense, and puts us at a disadvantage on the global oil and gas markets.

In summary American consumers own a large share of the big oil and gas companies and share an interest in their profits. If we tax or repeal tax credits for the industry; our pension funds and IRAs will become less profitable; oil operations will become more expensive, independent operators will cut jobs; gas prices will go up for American consumers; and we will hurt U.S. refineries and lose jobs because we can’t compete globally.

Which leaves us with the question: Does it really make economic sense to levy additional taxes on our oil and gas companies?