OIL PROFITS

Now that oil prices are holding or declining, and oil company earnings are down by large ratios, you might like to ask Sen. Jackson whether he plans to hold another televised two-hour bullying show on obscene oil profits, as he did in 1973. At that public exhibition he phoned his stockbroker to find out about oil profits, and if the broker is still in business, he can now bring him up to date on the profits that have accumulated since then. When Exxon's earnings are adjusted for taxes and inflation, even a stockholder with zero tax liability made only 1% on his investment since 1976.

Exxon, for one, has somewhat timidly informed its stockholders of its earnings when adjusted for reality. A brief and good explanation of taxes and depreciation has also been put out by Chevron ("Understanding Petro Taxes," free from Standard Oil of Calif, 225 Bush St./# 1167, San Francisco, CA 04104). Mobil continues to publish some good advertisements with One hand, while it continues to give lavish grants to the Public Brain-washing System (PBS) with the other, just as Exxon (see editorial) continues to fund the American Association for the Abolition of Science (AAAS).

But if you can no longer harass oilmen with obscene profits, you can do so with intangible drilling costs (IDC) -- allegedly a tax loop hole, accounting device and "paper loss." They are none of these, but genuine outlays paid for in cold cash taken out of the equity paid for by investors. Examples are drilling mud (the water plus chemicals rinsing and cooling the drill bit at the bottom of the well), the casing, the road to the rig, etc.; and all of this is risked with a 90% chance that the well will end up as a dry hole. Exploratory drilling and domestic energy production would be badly hit by "taxing" these costs (actually imposing a punitive levy on them). Naturally, the small independents would be hit most: not only because they are small, but because it is the small wildcatters who do most of the new exploration. In the recent tax bill, disgraceful as it is, they were spared (following a mammoth lobbying effort), but "integrated" oil companies will be able to expense only 85% of their IDC.

[Sources: "Intangible Drilling Costs: A Tax on Risks," Issue Bulletin by the Heritage Foundation, 513 C St. NE, Washington, DC 20002; Profit figures by W.R. Grace & Co.; booklet by Chevron mentioned above.]