Aren’t the oil industry’s earnings much greater than other industries?
America’s oil and natural gas industry is strong and economically dynamic, contributing $476 billion to the U.S. economy in 2010. Given the perception of “big oil,” it may be surprising that oil and natural gas earnings are typically in line with the average of other major U.S. manufacturing industries. Over the last five years, earnings for the oil and natural gas industry have averaged about 7 cents for every dollar of sales, well in line with the rest of the U.S. manufacturing industry. By the first quarter of 2012, and as the U.S. economy continued to recover, that average rose to 7.5 cents on the dollar for the oil and natural gas industry, but was smaller in comparison to the 8.9 cents on the dollar for all U.S. manufacturing.
Despite having earnings on par with—or even below other industries—U.S. oil and natural gas companies pay considerably more in taxes than the average manufacturing company. In 2011, U.S. oil and natural gas income tax expenses averaged 40.6 percent, compared to just 25.1 percent for other S&P Industrial companies. The U.S. oil and gas industry also pays the federal government significant rents, royalties and lease payments for production access – totaling more than $100 billion since 2000. Thus, policymakers who only report oil and natural gas profit numbers aren’t providing a complete picture and don’t take into account production costs or taxes.
Like other industries, the oil and natural gas industry strives to maintain a healthy earnings capability. It does so to remain competitive and to benefit its millions of shareholders – most of whom are regular Americans – across the country and in all walks of life. Healthy earnings also allow the industry to invest in innovative technologies that improve our environment and increase production to keep American going strong – even as it leads the search for newer technologies, and new sources of energy that will provide a more secure tomorrow.