What do oil companies do with their earnings?
Revenues from oil and natural gas industry royalties and taxes—at both the national and state levels—meet local community needs by funding roads, schools, parks and other initiatives. The oil and natural gas industry pays the federal government approximately $86 million a day—or about $31 billion a year—in rents, royalties, bonuses, lease payments and corporate taxes. Furthermore, analysis of API's compilation of public data, independent research and corporate annual reports found that the industry paid out approximately $35 billion in dividends distributed to American shareholders in 2010 alone. This is all done while helping ensure continued supply of energy for United States’ consumers and businesses, and increased energy security.
Healthy earnings allow the industry to invest and reinvest in innovative technologies that improve our environment, increase production and help provide a more secure tomorrow. The oil and natural gas industry has enormous investment needs and U.S. energy companies must continually invest in new energy projects in order to keep pace with global energy demand.
Oil and natural gas discoveries that are announced today often result from investments begun by companies years ago. Since the year 2000, our industry invested more than 2 trillion dollars in U.S. capital projects. Additionally, the oil and natural gas industry is hard at work developing next-generation forms of energy including alternatives and renewables. Between 2000 and 2010, the industry invested $71 billion in new low and zero emissions technologies, far more than the federal government ($43 billion), and almost as much as the rest of private industry combined ($74 billion).
Finally, the oil and natural gas industry devotes the largest share of its earnings to adding new property and equipment to its upstream and downstream operations. It is the responsibility of company officials to support the equity value of the firms and build value for shareholders. One way to do this is through stock repurchases, on which the oil and natural gas industry spent an average of 34 percent of net income — almost half the stock repurchase rate for the S&P Industrials — for the past 13 years. Earnings are also used for paying dividends, which benefit the millions of Americans whose retirement funds are invested in oil and natural gas stock.
