Media Emphasize Exxon Profit, Restart Focus on Windfall Taxes
Williamss reporting was characteristic of the medias take on oil profits in this case, the $36.1 billion Exxon earned in 2005. But in 2004, Exxon reported lower profit margins than major companies in other industries, including companies which own and publish major newspapers. Additionally, a new Tax Foundation study found that the U.S. government is already cashing in from oil profits with corporate tax monies.
While Exxons profit is large in terms of absolute dollars, but so is the company. In 2005, profits for the worlds largest oil company were only 9.7 percent of its revenues, up from 9.6 percent of revenue in 2004, and far less than the 2004 Bank of America (NYSE: BAC) profit margin of 21.6 percent or Johnson and Johnsons (NYSE: JNJ) 18 percent, according to data from Forbes magazine.
Within the petroleum industry, ExxonMobil was vastly outperformed by Communist Chinas state-owned PetroChina, which yielded nearly a 23 percent profit in 2004.
Newspapers, part of the media that criticize oil profits, heavily outperformed Exxon in 2004. The average 2004 operating margin of publicly owned newspapers was 20.5 [percent], the Los Angeles Times cited industry analyst John Morton in its Nov. 24, 2005, paper.
Williams and his evening news competition on ABC and CBS avoided the temptation to feature full-length stories focused on windfall profit tax advocates. But print publications followed the next morning with the Exxon profits as a springboard to showcase left-leaning critics of the oil industry. David Lynch, in the January 31 USA Today, featured Rep. Edward Markey (D-Mass.) calling the $36.1 billion profit report grim news for American consumers, while the same day, The Washington Posts Justin Blum recorded criticism from Exxpose Exxon, which he labeled merely as coalition of environmental and advocacy groups.
Blum left out that the coalition skews heavily to the left MoveOn.org and Sierra Club are two key members and that Exxpose Exxon targets the Texas-based company in part due to its continued lobbying for Congress to open the Arctic National Wildlife Refuge (ANWR) for oil exploration.
While putting Exxon on the defensive for its successful business, neither Bloom or Lynch reported the windfall the U.S. treasury sees from taxes already paid by corporations, or more accurately, paid by consumers at the pump and forwarded to the government by oil companies.
During 2005, the Tax Foundations Jonathan Williams and Scott Hodge found, Exxon-Mobil, Chevron (NYSE: CVX), and ConocoPhillips (NYSE: COP) paid a combined corporate income tax burden of $44.3 billion on their reported gross earnings. Compared to last years combined corporate income taxes of $29.7 billion, their burden for 2005 has increased by 49.2 percent and follows the overall trend of escalating corporate tax collections in the United States.
Williams and Hodge added in their January 31 Fiscal Fact that the average effective tax rate on the major integrated oil and gas industry is estimated to equal 38.3 percent. This exceeds the estimated average effective tax rate of 32.3 percent for the market as a whole.
The Business & Media Institute (BMI) has previously documented biased media coverage of oil company profits. BMI has also reported how economists deride the proposed windfall tax as detrimental to oil company investment and to the savings of retirees benefiting from oil stock dividends.