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financial results underscore that.
During the first three months of 2009, oil and natural gas company earnings plunged nearly 70 percent as dramatically lower oil and natural gas prices, combined with low refinery margins, hammered the companies’ balance sheets. Demand for oil and natural gas is down and prices are sharply below year-ago levels. Despite the plunge in earnings, the industry is doing what it can to minimize laying off employees while striving to maintain the long-term investments needed to deliver American consumers the energy they need, vital to the nation’s economy and energy security.
What goes up can come down:
The case of oil industry earnings
In recent years, much media (and political) attention has focused on rising oil and natural gas industry earnings, bolstered by record-high oil prices. But the oil and natural gas industry, like other commodity businesses, is highly cyclical. It is an industry that must make costly and often risky investments in long-term projects to supply consumers with the energy they need to live, work and play. It is also an industry that supports six million U.S. jobs, pays billions of dollars to the federal government and strengthens the nation’s energy and economic security. The declines in earnings for the first quarter of 2009 were as follows:
Oil Company Royal Dutch Shell ExxonMobil BP Chevron ConocoPhillips Marathon Hess Occidental INDUSTRY AVERAGE*
Percent Change in Net Income from a Year Ago –55% –58% –64% –64% –80% –61% –108% –80% –60%
*Average as of May 8, 2009 with 23 oil and gas companies reporting earnings.
Unfortunately, these declines come at a time when Congress is considering huge increases in taxes and fees on the industry that will likely lead to lower production and increased imports. Now is not the time to kick the industry while it is down. We have learned from previous mistakes on taxing the industry that ultimately consumers and the retirees and other owners of oil companies will suffer because of it.
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