Republican Presidential Nominee Mitt Romney (Source: Bloomberg)
Oil washed out, far exceeding the moves lower in other commodities and Mitt Romney finally frames the energy debate hitting Obama in the green where he is most vulnerable. Time and time again I have criticized Obama for investing billions of dollars in high risk, low return energy strategies and being in bed with “Big Green” and being at war with “Big Oil” at the expense of jobs and the good of the American people. Mitt Romney last night did an excellent job framing the debate that goes far beyond just the killing of the Keystone Pipeline.
Romney hit the nail on the head when he said, “You put $90 billion, like 50 years’ worth of tax breaks, into solar and wind, to Solyndra and Fisker and Tesla and Ener1," he told the president. "I had a friend who said: 'You don't just pick the winners and losers; you pick the losers.'"
He said that “these businesses, many of them have gone out of business, I think about half of them, of the ones have been invested in have gone out of business,“a number of them happened to be owned by people who were contributors to your campaigns.” Romney forgot to mention Beacon Power and Abound Solar.
Romney went on, “And in one year, you provided $90 billion in breaks to the green energy world,” Romney said in a rebuttal to Obama’s criticism of oil companies receiving $4 billion dollars in tax breaks. You put $90 billion into — into green jobs. And I — look, I’m all in favor of green energy,” Romney said, “$90 billion? That would have hired 2 million teachers, $90 billion!”
By putting President Obama’s green energy spending binge in front of the American people perhaps they will quit blaming oil companies and speculators for rising oil prices and put more blame on the president.
In April of 2011 I wrote, “Big oil is blowing us away helping to drive the markets and reflecting the rebounding global economy and the growing risk to supply. Now the Obama administration wants to penalize ‘Big Oil,’ one sector of our economy that is actually creating jobs and actually helping lead the economy out of recession. This tired attack on big oil and this fraud that oil companies get preferred tax breaks and subsidies are ridiculous and would actually be funny if it were not so sad. While Obama continues to promise the creation of billions of so called "green jobs," he is exporting our oil producing jobs to other countries."
Now this latest charge that big oil gets "unwarranted" tax breaks for oil companies as a way to prevent Americans from facing persistently high gasoline prices, which are reaching $4 a gallon is another misrepresentation of the facts that is leading this country down a very dangerous path of penalizing successful, efficient business and prop up inefficient business that might serve the greater good to let them die on the vine.
Obama's distaste for oil companies is clear, but this ridiculous charge was exposed in a very spirited rebuttal from Exxon Mobil. According to Exxon Mobil their total taxes and duties to the U.S. government topped $9.8 billion, which includes an income tax expense of $1.6 billion. They go on to say that over the past five years, Exxon incurred a total U.S. tax expense of almost $59 billion, which is $18 billion more than they earned in the United States during the same period. In other words, Exxon paid more in US taxes than they actually made.
The reason why that's true is that the U.S. takes money to support alternative energy companies like, for example, GE that paid zero, zippo, nothing in taxes last year! Now you would think that the Obama administration would embrace a company that creates jobs and paid that kind of taxes and has helped keep our deficit from being even larger! Yet instead, he embraced the company that paid no taxes. Obama named GE's chief executive, Jeffrey Immelt, as the head of a Council on Jobs and Competitiveness. Exxon did not dodge U.S. tax and point out that their earnings are from operations in more than 100 countries around the world.
Of course a drop in oil prices like we had yesterday makes the President's green energy spending look even more reckless. Oil was on its own with a decisive move lower. Oh sure, you could point to a weak China non-manufacturing number and uncertainty surrounding Europe and the confusion over whether Spain will or will not ask for a bailout. Yet that would not explain why oil fell as hard as it did as other commodities held up better. It would not explain why oil ignored what on the surface seemed to be a bullish oil inventory report.
You could point to Saudi Arabia lowering crude prices to move more oil or even the return of refinery runs as a sign that things were getting back to normal after weeks of refining turmoil. Or you could just chalk it up to one of those seasonal factors.
Yes all of these facts were part of the equation yet for oil to get hit as hard as it did you may have to dig deeper. Even with all of the factors above, it is possible that the market may be reacting to the unfolding events in Iran and reducing the Iranian war premium.
The pressure is on the Iranian regime! Poor President Ahmadinejad. Not only did his camera man defect when he was in New York, now at home he is facing riots as the Iranian currency and economy is starting to collapse.
It seems that the sanctions are starting to put major pressures on the regime. Because that pressure is manifesting itself in the form of riots and unrest, it is possible that the regime will be more focused on restoring order instead of pursuing a nuclear weapon. Israel, seeing this unrest, may give sanctions more time to work.
