Obama Struggles To Explain Drop of Windfall Profits Tax for Oil and Gas Industry

Petaluma, Calif. - Barack Obama may already be losing credibility over his explanation as to why he dropped the windfall profits tax on the oil and gas industry from his administration's agenda. During his campaign, President-elect Obama promised to enact a windfall profits tax on the oil and gas industry, which would help finance a $1,000 emergency energy rebate for American families.

During the campaign, Obama repeated his commitment to enacting a windfall profits tax on the oil and gas industry hundreds of times. The Obama camp ran national television advertisements touting the windfall profits tax, and used the issue in campaign speeches right up to the election. ( Watch Here)

Now, any mention of the windfall profits tax has been quietly removed from the Obama-Biden transition website, www.change.gov, and an anonymous "transition team aide" acknowledged that the windfall profits tax had been dropped.

The Obama camp's explanation as to why the windfall profits tax has been dropped is inconsistent with the facts and the actual series of events.

The main excuse the Obama camp offered was that the price of oil had dropped below $80 per barrel, and as a result there was no need for a windfall profits tax. There are several problems with their excuse.

According to OPEC, the price of oil dropped below $80 per barrel in early October, yet Obama continued to campaign on the promise of a windfall profits tax.

The windfall profits tax was the number one issue under "economy" on Obama's transition site, www.change.gov, when it was launched on November 6th and the price of oil was $54.89. It was removed without explanation on November 8th. The price of oil remained relatively stable during that three-day time frame and any minuscule change would not justify the sudden and unexplained elimination of one of Obama's cornerstone campaign promises.

The oil and gas industry has been making excessive profits for several years, even when the price of a barrel of oil was dramatically less than it is now. At the present moment gas prices have decreased, but with no windfall profits tax in place the oil companies are free to arbitrarily increase the price of gas at any point in time.

In 2003, when the average price of a barrel of oil was $30.06, big oil companies reaped record profits.)According to an Associated Press (AP) article dated January 29, 2004, Exxon-Mobil earned $21.51 billion in profits during fiscal year (FY) 2003. At the time, the mark nearly doubled the company's profit during FY 2002.

It is difficult to believe President-elect Obama's explanation for dropping one of his most significant campaign promises when you look at the facts.

Comments

[DelvinMcGee]

Here are a couple of facts for the folks on this board:

#1 The average profit margin of American oil companies is 8.4%, less than nearly every other business channel.
#2. In 2007 Exxon Mobile alone paid more federal taxes than the bottom 50% of all taxpayers combined.

[kevlar0076]

I think a point being missed here in the comments that is stated in the blog - is that the oil companies have been reaping windfall profits for years, regardless of the price of oil. Consumers see this issue based on what we pay for a gallon of gas, but the bottom line is that there is no connection or correlation between the price of a barrel of oil and the oil companies profits- whatever the price of oil, the profit margins of the oil companies remains the same. The only connection is when they sell more, their profits go up, it is not based on the price. As Lloyd pointed out- look at the story from 2003, if you change the date, it could have been written a few months ago, except that the oil company profits have more than doubled since then. The only thing to change is that the American public is no longer outraged because we are not paying 4 or 5 dollars a gallon at the pump. WAKE UP - we are being taken advantage of and have been for a long time. I voted for Obama and I still think he will do a great job, but if we are vigilant and call him out on these issues, then nothing will change...

[ldavis24]

Do any of us really think that oil prices and thus gas prices are going to rise extremely high again.
If you don't then you are crazy.
Wait for summer when it is 3.00 a gallon or 4.00 a gallon again. It might take a little while but its going to happen and we'll all be left wondering why he forgot about the windfall profits tax so casually

[UncommonSenz]

No, it will just be that THEN will be the right time to pursue the tax.

Even the rumor(emphasis on RUMOR) doesn't say he is abandoning the windfall tax, just that he won't do it NOW.

There is a political reality out there, and it limits what he can get done. If he has to choose between the windfall tax (now) and health care, that is a no brainer. Especially when he can get consensus on issues like health care now, and STILL come back later for the windfall tax.

Just because a lot of the posters here have no clue about what is possible and what is not does not mean Obama doesn't.

[ldavis24]

I'd love to see him actually take care of health care first but as someone who voted for him the road is going to be tougher than people think.

The odds of him getting a consensus on something like healthcare are miniscule when considering how huge the issue is. I want for him to do well and I truly hope he does but the system is not set up help him in his endeavors and when he starts backtracking there is no clue as to when it will stop...

You are right he did not say he was never going to deal with the windfall profits tax but how many times have we heard "just not right at this moment, there are more pressing issues" and then said subject is left to shrivel in a corner. People need to stop thinking this man is going to make puppies fall from the sky and everything will just magically be alright. He still is confined by our broken system of government and he STILL is a politician. Something I've never forgotten even when I voted for him.

[jbatch]

Let's see: when he first mentioned a WPT, oil was selling for over $30 a barrel and now it's selling for less than $50 ...

Geez, could he have droped it because the windfall profits dropped?

Do folks want a Presidnet who goes blindly in the same direction no matter how events change?

Seems to me we just had that and it didn't work out too well.

[musselmanm]

You all sound like you want a new HDTV. I feel that now is a time for a stable hand. We do not need to go out spending gobs of money trying to revive our economy and at the same time punish employers which employ a great many of our citizens or cause people to be employed. Petrolium goes into many more things than gasoline and motor oil. We do not burn all of the oil which we consume.
A tax based on actual windfall profits is acceptable but we must allow for a decent profit margin so these companies will continue to be agressive in research and technology. We should perhaps offer a tax incentive for these companies to develop new sustainable energy and infrastructue such as pipelines and refineries.
Many ideas to make our country and our business' better and more profitable without ripping off consumers are available, we just need to listen to each other and come up with the best plans.
Democrats can have the ideas or Republicans, lets work together as we so clearly need right now.

[bluemike]

Let's hope he reconsiders. High gas prices, coupled with obscene profits, can occur again.

[UncommonSenz]

And THEN he can pursue the tax.

It won't pass now, but it will generate opposition.

It won't earn a nickel of tax right now, but it will generate opposition.

It will hamper consensus building on things like healthcare, while it generates opposition.

Just because he doesn't do it NOW does not mean he won't get it done later.

Stop fretting and demanding everything be done at once.

[newshawk14]

I don't think the problem is so much a windfall tax profits bill, as it was a former bill that granted
them unusual protections from paying normal taxes, and their profits have been unusually large.

[super]

A windfall profits tax never made sense. The gas cos would have just passed it along to the consumers.

[drock973]

I can explain it easily, he was pandering.

[harveyr2]

Big Oil's profit as a percentage of revenue is below the average for the S&P500.

There are many, many companies whose profit percentage is far greater than that of Big Oil. To additionally tax Big Oil and name it windfall-profits tax is pandering at is most inane level.

[KQuarksSuperKollider]

You cannot tax windfall profits when they don't exist.

The whole idea of a preemptive law is as ignorant as preemptive war because how can the law possibly fit a situation that is unknown.

Obama is committed in taking the subsidies away and that should be enough for progressives.

We learned the whole supply and demand argument for gas prices increasing was BS because consumption has only gone down 10% bu the price of oil has gone down 400%. Obviously it was the energy speculation created from the Enron loophole that created the problem. Windfall profits where the symptom rescinding the Enron loophole will cure the disease.

This is just more insane criticism of Obama from the left which is the left's new dogma because Obama is not kowtowing to anyone.

[scubafox]

Nonsense. The price of gas went down because the oil oligopoly manipulated it down. Before the election it was an attempt to keep Republicans in power. After they kept it down to attempt to prevent a windfall profits tax. It appears Obama is falling for it and pandering to big oil and the right-wingers. So much for Obama's credibility ... oh, wait ... he lost that when he failed to oppose the FISA bill that he vowed to filibuster. Just another betrayal. Get used to it.

And for the record, there is no "left" left in America. Democrats are only slightly less far to the right. See the diagram:
http://www.exponentialimprovement.com/cms/einsteinsoc.shtml#CapSocDic.

[BLinCincinnati]

"The price of gas went down because the oil oligopoly manipulated it down."

HAHAHA. Yeah, and I'm sure all those mega banks, holding companies, hedge funds, etc dumping all their oil contracts to raise massive amounts of cash to remain solvent had nothing to do with it huh?

[Maxamillion]

US integrated oil companies (Exxon, Chevron, Conoco Philips) control all of 6% of the worlds oil supply. They have been investigated many times during times of oil price inflation and not ONE study has found them complicit in any price manipulation. Additionally, now that the Republicans lost the election wouldn't you think (by your logic) they would just "manipulate" the price back up---since they are such greedy bastards?

[judyc]

Geez--can the guy get in office before we start the criticizing, belittling, doubting, etc.?

Sheesh.........

[MsFeminist]

Could we please just cut to the chase?

Does this mean the American family won't get that promised $1000 to help us survive this mess or not?

[kristycu]

no that is going through no matter what. he has already stated that.

[AnotherMcIntosh]

Practice what you preach.

[scooperss]

"At the present moment gas prices have decreased, but with no windfall profits tax in place the oil companies are free to arbitrarily increase the price of gas at any point in time."

And they will and once again the people will get taken for a ride while Congress sits on it's collective a$$.

DO IT NOW SO IT'S READY FOR LATER.

[Yermammy]

Yes, really. Now would the the ideal time, when they wouldn't have to pay, but would when the prices go back up (and you KNOW they will). You always put a pressure valve on a tank with no pressure. Same common sense applies here (unless big oil said "NO!" and Obama meekly said "ok")

[Bruupo]

The gas price was inflated by speculation. The capital for the kind of speculation that was re-allowed per the "Enron Loophole" no longer exists. It was the drying up of that capital that lowered the gas and oil prices, the drop in demand was very much secondary.

The oil companies have never been free to arbitrarily increase the price of gas, that's why the Congressional Hearings they get dragged in front of every time the gas price spikes never go anywhere. The oil companies keep their profit margin consistent regardless of the price of oil per barrel.

It's the one talking point they hammer over and over again in those hearings. Sure, their total profits sky-rocket, but the margin doesn't change.

What we need most are regulations that prevent that kind of speculation in energy markets from ever happening again.

[Territc]

Ignoramus' all of you. Windfall tax is imposed on profits arising from the cost of oil over a certain benchmark. If the price of oil is benchmarked at e.g. $50 a barrel and the price rises over this point, then windfall taxes may be levied. If the price of oil drops to the benchmark then there is no need for windfall taxes. The price of oil per barrel is not controlled by the oil companies but by OPEC. The oil companies are responsible for pricing of gas at the pump and you would need to look at the breakdown of that pump price. The full amount does not go to the oil companies alone. Yes, fine gas prices are too high, but for the author to suggest that windfall taxes will ensure they do not increase the price of gas at the pump is ludicrous. If the price of oil per barrel goes up then yes the price of gas at the pump will go up to. The issue is by how much and how much of that increase can be taken as windfall profit.

The following statement by the author is totally misleading. "At the present moment gas prices have decreased, but with no windfall profits tax in place the oil companies are free to arbitrarily increase the price of gas at any point in time." The only way you can fix gas prices is to regulate gas prices.

[Yermammy]

THANK YOU.
thank you.
THANK YOU.
thank you.
THANK YOU.
(Did I mention to THANK YOU?)
Let the screeching apologies begin!!! LOL! :)

[truthtimeisnow]

Chapman's point regarding the price of oil in comparison to record profits seems to be right on point. As far as I can tell, oil companies have reaped record profits even when the price of oil was below $30/barrel.

[Hawka]

Uh, the fiscal report goes a bit further back then October when Oil was at a record high before the prices dropped if I recall.