The oil and gas industry makes exorbitant profits
Especially during high gas prices, the media often publicizes oil and gas company profits in an unfavorable light, portraying companies as greedy entities gouging customers for unfair profits. While absolute profit numbers can be large, they only reflect the size of some of the major companies, which is needed due to the sheer scale of the industry and the necessary capital required for operations. Oil and natural gas company earnings, in fact, are in line with the average of other major manufacturing industries, and are well behind many companies in the technology sector.Many outside the industry fail to realize that behind the earning numbers are massive capital requirements for prospective projects that have no guarantee of success, characterized by long lead times, which hold uncertain returns that are only realized years later after enduring considerable investment risk from outside factors such as oil prices and government regulation. Oil and gas companies also pay considerably more taxes than the average manufacturing company and are subject to increasing costs from additional regulation, permitting and licensing. During 2006-2008, oil and gas companies in the U.S. paid over $280 billion dollars of income tax expenses.
The oil and gas industry is owned by industry executives and “big oil fat cats”
There is also a common misperception about the ownership of oil and gas companies and a myth that only a small group of well-connected industry executives are profiting from oil and gas production. In fact, only 1.5% of share of publicly traded oil and gas companies are owned by corporate management, while the majority share is owned by shareholders and mutual funds, many of which are in turned owned by Canadian and American households investing and saving through the purchase of energy shares for RRSP and IRA accounts. When politicians talk about punishing oil and gas company owners through higher taxes, they are in fact punishing individual everyday investors.
The oil and gas industry is dominated by “big oil”
Contrary to a general public perception of oil and gas companies being multinational giants with tens of thousands of employees, the “average” independent oil company in North America according the Independent Producers Association of America employs 11 full time employees, produces gross annual revenues of $7.85 million and has crude oil production of 300 Bbls/day. In the U.S., small independent oil and gas companies produce 68% of the country’s oil, 85% of natural gas supplies and drill almost 90% of the country’s wells. Junior and mid-sized independent producers drill 40% of all conventional oil and gas wells in Canada and drill more than half of all high-risk exploration wells. Small and medium sized independent producers employ tens of thousands of employees across North America and shoulder a great deal of the exploratory risk in the industry. While the multinational giants garner most of the attention from the public, media and politicians, the smaller independent producers are a critical contribution to North America’s energy supply and economy.
