Tabloid headlines are obsessed with the notion that big oil equals big profits. Type “Shell” into online media search engines and up pop the following examples: “Shell’s ‘obscene’ £13.9billion profit is biggest ever by British company” (Daily Mail); “Shell records almost £8bn profits” (The Independent), “Shell announces £2m an hour profits” (The Guardian).
This creates an atmosphere of distrust, where politicians can demand a windfall tax on these big bad oil and gas companies. Senator Obama has made it part of his election platform. And last month at least 80 British MPs signed a petition for a one-off tax on energy company profits. This is great winning territory for the left: tax the oil fat-cats, to provide “relief to low-income folks”, as Barrack himself so eloquently put it.
But headline profit figures mean nothing unless related to the scale of industry. Even those who realise the importance of the large earnings of the oil industry seem unwilling to admit this, refusing to abandon the tired image of the oil oligarchy and its “gazillion-dollar profits”. “Hurrah”, wrote Carl Mortished in The Times in April, “Without the inflated earnings of multinationals, we’d be even worse off than we are now!”.
But Mortished undermines his own call to celebrate oil, relying as his does upon the age-old vocabulary of distain for its “grotesquely inflated earnings “. Because actually — and here’s the real irony — oil company profits are not “grotesquely inflated” at all.
Sure, big oil earns big. But as a ratio of profit to sales revenue, oil and natural gas are actually bang in the middle of a table of major industries — 6.8 cents per dollar of sales according to figures from the 2nd quarter of 2008, compared to a trans-industry average of 7.[1] The highest-profit industries were pharmaceuticals and medicines (at 26.3%, nearly 4 times the average industry earnings for oil and gas), chemicals and electrical equipment, appliances and components. The lowest-profit industries were paper (at 2.1%), and motor vehicles and parts (at -18.6%).
Oil companies invest massive sums in exploration, extraction and infrastructure. And these days we also expect them to invest in research and development, and in new technologies.
They are also heavily taxed — between 2003 and 2007, Exxon paid $64.7 billion in U.S. taxes, exceeding its after-tax earnings by more than $19 billion — and thus fund our pensions and our health services. Their dividends support our pension funds, and they provide employment on a large scale. In the current climate of economic turmoil, they provide job stability.
So shouldn’t we be more grateful to these industries; isn’t their gain, our gain?
It is about time for us to support, not undermine, our oil and gas industries. Not only are their company profits rather more modest than would at first appear, but they also boost growth and prosperity. What’s more, in an age of energy insecurity, we should not be discouraging oil companies from offering us dependable energy. This is the most important thing to remember. Because unless we wish to be increasingly beholden to the Middle-East for our energy, we need to start supporting, rather than subverting the oil industry.
[1] Figures based on U.S. company filings with the federal government as reported by the U.S. Census Bureau and Oil Daily.
Following my Climate Seminar on Monday, the questions and insinuations from the press are starting to come in. Of course no one would argue against anthropogenic global warming unless they had been bought and paid for by the oil industry. Of course politicians are venal. Of course anyone who argues a case must be getting paid — why else would they do it?
I’ll tell you why. Because I have studied the evidence and I passionately believe that (A) The climate change we are seeing is very modest, and is in line with natural cyclical variations over the last 2000 years; (B) It has nothing to do with human activity; (C) Even if it had, the policy responses proposed would have zero effect on climate — but a catastrophic effect on our economy; (D) Action to adapt to climate change (to the extent that it is happening at all) would be both more effective, and hugely cheaper, than current proposals for mitigation (i.e. trying to stop climate change). As Bjorn Lomborg has pointed out, for far less than we plan to spend on mitigation, we could ensure clean water and education for everyone on the planet who needs it. And we could eliminate malaria while we’re at it, and still have change left over.
I see action being proposed, and being taken, which will achieve nothing but to impoverish my grandchildren (and hasten Europe’s relative economic decline), and for me that is a good enough reason to oppose the alarmist hypothesis.
So how much have I been paid? Short answer: nothing at all. Not a penny. Zilch. Zero. I don’t think I’ve ever had so much as a dinner from Exxon-Mobil (or any other oil company). No brown envelopes. No castles in Spain. No trips to Texas. Or anywhere. Most of the overseas trips I have taken in the course of my work have been paid for out of parliamentary expenses. The odd one has been paid by the American Legislative Exchange Council, an American Public Policy Institute involving many hundreds of state legislators. It has dozens of blue chip corporate partners, so I guess if you check the list it would include the occasional oil company, but it is not predominantly concerned with energy issues, nor is it predominantly funded by the oil industry. I have frequently addressed their conventions (not, though, so far as I can recall, on energy issues), and they were kind enough to appoint me as their Adam Smith Scholar, and in 2006 to award me their first International Legislator of the Year Award.
Fair question, straight answer. So let me ask a question in return. What about the funding for the climate alarmists? Literally billions of dollars poured into research projects predicated on climate alarmism. And into propaganda (see my report on the EU’s “Agora” below, with the EU funding dozens of NGOs supporting the alarmist position). Many thousands of people making a living out of it — scientists, journalists, lobbyists, wind-farm merchants. And indirectly, companies that have decided to pander to alarmist sentiment as a deliberate marketing ploy.
So I’ve a message for any journos who want to start digging on my motivation on climate change. Feel free to dig. But recognise that the big bucks are with the alarmists, and start asking them a few questions for a change.
