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By Robert Rapier on Feb 19, 2008 with no responses

Due to Censorship at Huffington Post….

I had posted a response to Judy Dugan’s latest hysterics at Huffington Post, but it has been “pending moderation” for 4 days now. I suppose because I didn’t violate any of the rules that would cause it not to be posted, but I challenged Dugan’s competency, they figured they would just hold it until the story got stale. Huffington Post simply censored me the last time I tried to respond to one of Dugan’s screed (and so far they are doing it again). Below is exactly what I tried to post. It is milder than her initial story.

So, here is my response, followed by one from “armchair” over at Dugan’s Oil Watchdog site on the same story. You have to “unhide” the comments to see that one since they went to de facto censorship on all comments.

This post of Dugan’s is full of inconsistencies. Open up a blog post with a complaint that an editorial was partially based on a blog post. Then go right into an ad hominem by characterizing the source as “hard-right.” Nice journalism. Then, misrepresent the editorial ” “we must offer gratitude instead of criticizing” when in fact it implied no such thing. What it did attempt to do was set the record straight with people such as yourself who have no concept of economics ” and point out just how much the oil industry adds to federal coffers via taxes each year. The final irony was to suggest that Perry’s post was mean-spirited. And yours was…?

Furthermore, what is your deal with stock buybacks? If a CEO feels a company’s stock is undervalued, and the returns from buying back the stock are expected to be higher than additional capital investments (which are already in the multi-billion dollar per year range, as are oil company investments into alternative energy), then I expect that CEO to buy back stock. So what if it doesn’t increase dividends? Do you think investors are unhappy that dividends didn’t increase, when the stock value did because of the buybacks? Nonsense! Stock buybacks are a perfectly legitimate way of increasing the value of remaining shares ” if those shares are deemed to be undervalued.

Finally, don’t take this as a blanket defense of ExxonMobil. It isn’t. I can count on 1 hand the number of times I have bought their gasoline since the Exxon Valdez oil spill, and that’s only when I didn’t feel I could make it to another station. But someone needs to address this misinformation you persistently churn out. I get the feeling that if oil companies are funding schools for orphans, you will have something negative to say about that (just as you have over oil company investments into alternative energy).

Robert Rapier

And now “armchair”:

The $30 billion in taxes can also be viewed as about 7% of Exxon’s total revenue, $405 billion.

Discussing a tax rate in terms of revenue is a meaningless concept. But it sounds good to potential donors, and Dugan has just sent out emails soliciting donations.

Prof. Perry notes that over three years, Exxon’s annual taxes average $27 million.

Exxon paid $69 billion in taxes in 2006 alone. It’s in their annual report.

Here’s what Perry, much less the IBD editorial, forgets to mention about those taxpayers:

Here’s what Dugan fails to mention about Exxon:

- It employs about 106,000 people. It pays 50% of their social security taxes. It pays for their medical insurance.

- Those employees pay taxes on their Exxon salaries.

Additionally, the foundation for all of her criticism must be that Exxon is responsible for high oil prices. She has forgotten to provide even a shred of credible evidence for her claims. That a company with a 3% market share can control anything defies common sense.

- None of these low-income Americans’ taxes went to Kazakhstan, Chad, Nigeria or other corrupt nations with which Exxon does business.

I am in a state of confusion over this point Dugan keeps making. The countries she mentions produce about 5 million barrels of oil per day, and if we add the “others” (she’ll make the call) then there’s a lot more. Does she want to pull that oil from the market? A few months ago she severely criticized the US Secretary of Energy for putting a few tens of thousands of barrels in the US strategic reserve. I’m going to assume she wants that “corrupt oil” to remain on the market, and therefore is happy for those revenues to go to those governments. I guess Dugan feels her conscience is cleared by publicly placing the ethical burden on the middleman who brings that oil to her and other consumers.

But you’re part of the system, Judy Dugan, so such a position is not very clever. You benefit from those 5 million barrels, whether Exxon produces it or someone else does. Unfortunately, oil that you use is not always found in places you find convenient or politically correct. We as a society have to make choices and accept consequences. What is your choice? Produce the oil, or not? What are the consequences?

- None of these little taxpayers shared in the billions of federal government subsidies to oil companies that their taxes also helped fund.

Obviously Dugan does not understand the concept of the marginal investment and the nature of subsidies. It’s not worth explaining here.

Over the last three years, Exxon has spent an average of at least $25 billion a year on buying back its own stock instead of investing in growth or modernization. The buybacks are a corporate piggy-bank with little or no economic use except for keeping the stock price high. It doesn’t even boost dividends.

Do you think maybe it makes their stock look more attractive, and has the result of decreasing their cost of capital? Do you think they would buy back all of that stock if they had more profitable opportunities to invest the money in? This comment shows a very fundamental lack of understanding of the oil industry’s business environment, particularly the upstream business.

Exxon’s daily cash on hand in 2007 averaged $33 billion. Yet it continues to resist paying $2.5 billion in punitive damages to Alaskans permanently harmed by the negligent Exxon Valdez oil spill in 1989. Imagine what Exxon’s lawyers are being paid, year after year, on this case.

So you have aready decided they are guilty, even though the case is still ongoing. Why don’t you call the judge and save everyone some time and money? Exxon should just pay, because they have a lot of money. Good point.

And, just to compare to those $14,000-a-year folks, some of whom are probably Exxon employees, Exxon’s 2006 compensation to CEO Rex Tillerson included $13 million in direct payment, another $13.5 million in stock grants, and $480,000 in perks including $100,000 for “personal use” of the corporate jet. That doesn’t include his right to more than $20 million any time he decides to “retire.”

Oil industry CEO compensation is about the same on average as for US CEO’s across all industries. You can look it up. I’ve done so, but will spare you the graph. His salary probably pales next to lots of Hollywood types and athletes. But we’re all OK with that, aren’t we?

Dugan is starting to bore me at this point, though. There really isn’t any sport in this.