A campaign promise kept: he wants higher gasoline prices and his policies guarantee they will only go higher.
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Oil companies should not be getting subsidies from the government in any event. But the dollar amount of oil profits is high because the oil companies invest such huge amounts to produce oil. As a return on investment or sales, oil profits are modest. While ExxonMobile and the other oil companies earn about 7% on sales, respected public citizens such as Google, Microsoft, and McDonald’s regularly earn 20% or more.
Moreover, the fundamental truth is that the government doesn’t subsidize oil companies. Oil companies subsidize the government. ExxonMobile alone pays more in income taxes than the bottom 50% of income earning citizens combined. In 2008 alone, ExxonMobile paid $116.2 billion in taxes. The effective corporate tax rate for all oil companies in 2008 was 42.3%.
In addition, the tax provisions Obama calls subsidies for oil companies involve the oil depletion allowance, expensing for indirect drilling costs, and the foreign tax credit, the first in the tax code since the beginning almost 100 years ago. But these are standard tax provisions allowed all mining, manufacturing and international companies for business expenses, depreciation and taxes paid to foreign governments, not subsidies. Abolishing them for oil companies would involve simply punitive taxation appropriate only for political scapegoats.
But this policy answer should earn President Obama a follow up question: how does raising taxes on oil companies reduce oil prices? Answer: it doesn’t, it raises them even more.
A Consistent Obama Policy
When a citizen did manage to ask President Obama about rising gas prices recently, Obama answered coldly, “If you’re complaining about the price of gas and you’re only getting eight miles a gallon, you know, you might want to think about a trade-in.”
But at least President Obama’s answers and policies on the issue have been consistent. When asked about allowing more drilling during the 2008 campaign, he answered, as quoted by Investors Business Daily, that such drilling would not “lower gas prices today. It would not lower gas prices this summer. It would not lower gas prices this year.” He added that “There’s no silver bullet that can bring down gas prices right away,” and anyone who says otherwise is just “trying to grab headlines or score a few points.” He said he would not offer the “false promises, irresponsible policy and cheap gimmicks that might get politicians through the next election.”
In other words, he did not campaign on bringing down gas prices. He said actually that doing so was not possible, even though policies enacted that very fall opening up future oil supplies led to collapsing oil prices soon enough.
America holds vast energy resources, far more than any other country overall, enough for America to be the world’s number 1 coal producer, natural gas producer, nuclear power producer, and darn near the world’s number 1 oil producer, if producers were just set free. But voters already have their answer from President Obama on this issue. If you want the lower gas prices, lower oil prices, and lower energy prices necessary for a booming economy, you are going to have to get yourselves another President.
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