In a “we versus them” speech today, President Obama again called for the end of subsidies for oil and gas companies. His speech talked about the global opportunities that the big oil companies are having as it is and that they are drilling more now than in prior years and that this is allowing those oil companies to rake in plenty of profits.
Exxon Mobil Corporation (NYSE: XOM), Valero Energy Corporation (NYSE: VLO), and Chesapeake Energy Corporation (NYSE: CHK) probably have been expecting more and more calls against these subsidies since the day President Obama was elected. All three are down with the broad energy sector today. Exxon is down only 0.5%, Valero is down almost 3%, and Chesapeake is down 2.3%. This was not the first call to end tax breaks, nor will it be the last.
Before thinking this is too one-sided, the take here is that this just needs to be explained better. Depletion allowances are something that has been on the books for generations because it is not exactly as though oil fields are factories that will last hundreds of years. There is a finite life that is not endless.
It is easy to attack subsidies. There are many subsidies and incentives that actually should certainly be removed as there should be ample profits as it already stands for the big oil companies. Still, there are some which have to be considered and clarified better than simply taking an “us versus them” speech that just attacks billions and billions in subsidies because it sounds good. Quantifying what these subsidies are is something that no politician does very well, and that is true on both sides of the aisle by and large.
Obama is continuing the call for more advanced homegrown biofuels, more clean and renewable energy, more energy-efficient buildings and cars, and is continuing to tout how it is time to double-down on investing in these areas along with wind and solar. Another note that President Obama did continue with is an “all of the above” strategy for an energy policy that is still a very unclear energy policy at best.
If this speech was aimed at helping alternative energy players, it has not so far been recognized in shares of First Solar, Inc. (NASDAQ: FSLR) as they are still down 0.7% at $24.89.
As oil was lower on the day ahead of this speech and due to testing a technical level on the downside, we see that shares of United States Oil (NYSE: USO) are down over 2% at $39.35.
Interestingly enough, the endless farm subsidies not ever mentioned. Nor were the real risks in throwing real taxpayer money rather than tax breaks that are already costing the public in failed alternative energy companies. Is it fair to bring up “Go Evergreen Solar! Go Solyndra!” today? Those are wasted dollars that won’t be coming back and there is nothing to show for it. Hopefully some of the other DOE loan guarantees will have real payoffs in the future.
Attacking oil companies is nothing new, and this will not be the end of these calls. Oil companies do need to be a part of an energy policy in the future, as do alternative energy companies. An “all of the above” strategy sounds great on paper but the underlying cooperation has just not been that evident in forming a real energy plan.
JON C. OGG