Big Oil, Big Profits, Big Green Lies

The real Mr Big behind the oil profiteering racket isn't Big Oil - it's Big Government

It's not Big Oil that has oil on its hands
Peter C. Glover
On 13 April 2012 16:50


The fact is that energy industry profit margins are cyclical. According to Robert Bradley Jr., CEO for the Institute for Energy Research, between 2006 and 2010, the largest oil companies averaged a profit margin of around 6.5 percent. As Bradley states, “This pales in comparison to profit margins in just about every other industry” the “pharmaceutical industry, for example, routinely averages a profit margin of about 16 percent. The soft drinks market is even more lucrative.”

In short, oil companies in the States make around 7 cents per gallon, while the U.S. Government “extracts more than 48 cents, on average, per gallon...nearly seven times more out of the drivers’ wallets via taxation than Big Oil” (italics added). As an Investors Business Daily editorial reported, in the second half of 2011 the “U.S. oil industry earned around 6.7 cents per dollar of revenue, less than the average for all manufacturing of 9.2 cents”.


Put another way, oil company profits in the U.S. turn out to be fairly pedantic when viewed on a broader canvas. Indeed, it is U.S. government anti-fossil fuel policies that are the hugely influential factor when it comes to driving up the cost of crude; not least by putting every conceivable obstacle in the way of deepwater offshore, shale oil and gas drilling and, more long-term, the importation of cheaper Canadian oil via Keystone.

And we can add to that the impact from a raft of green taxes and anti-carbon emission regulations that actually are actually having a zero impact on global CO2 emissions, thanks to the industrialisation of the Asian giants, India, Brazil etc.

In the UK, the hand of government is equally blatant. A BBC report in October 2011 showed that the cost of oil represented just over 45p of the price of a litre of petrol costing then £1.34p (about 10p less than today). The report found that the UK Government takes just under two-thirds of the cost at the pump with 58p of every litre being fuel duty and a further 23p is paid to the government on both petrol and diesel in the form of VAT (Value Added Tax). In short, over 80p out of every pound spent at the pump finds its way into government coffers.

The BBC report went on to cite a report by energy industry consultants Wood MacKenzie that showed how “a good chunk of government revenue comes from taxing the profits of oil companies’. Bottom line: when oil company profits rise, so does the massive government tax rake off. As the online watchdog agency concludes from the BBC and Wood MacKenzie studies, “Whilst the oil price may have something to do with the price you pay at the pump, fuel duty, VAT and other taxes on oil company profits are the main drivers of the cost of fuel in the UK”.

When it comes to understanding how the energy markets work, focusing on times of larger profits may light a fire under the anti-capitalist left and green activists. But that should not sway Joe Public to go to war against their imaginary pantomime villain.

The sheer fact of the matter is that the real Mr Big behind the oil profiteering racket is Big Government, not Big Oil. But it’s just not in the interest of the anti-capitalist Big Green to target high-taxing Big Government oil profiteers; that’s the goose able to lay their leftist social engineering ‘eggs’.

Peter C Glover is International Associate Editor, Energy Tribune & is co-author, Power Politics: The Inside Track On Energy (e-book, HardWired Books).

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