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Washington Examiner


Rex and Jeff illustrate Washington's Gas-Price Hypocrisy

May 18, 2011

By Robert Bryce

ExxonMobil’s Rex Tillerson, 59, and General Electric’s Jeffrey Immelt, 55, are about the same age. They both head iconic U.S. companies. Last year, the two chief executive officers made about the same amount of money, with Tillerson at $21 million and Immelt $19.6 million.

Both men are leading figures in the energy business. That’s obvious in Tillerson’s case, but Immelt’s GE is a major player in the oilfield services sector. In addition, GE controls about 40 percent of the global market for gas turbines. Overall, more than a quarter of GE’s revenues now come from what the company calls “energy infrastructure.” And during the first quarter, that division delivered about 28 percent of the company’s profits.

But for all their similarities, Rex and Jeff are separated by a political double standard: President Obama likes Immelt and has even given him a prominent position within his administration. But Obama and his Democratic allies take every opportunity to vilify Big Oil and Rex’s entire industry.

Last month, during his weekly radio address, Obama took aim at the oil industry, saying that the United States should stop “subsidizing yesterday’s energy sources.” He said Congress should eliminate all tax preferences for the oil industry, which amount to about $4.4 billion per year, because the energy companies are “making record profits and you’re paying near record prices at the pump. ... It has to stop.”

Earlier this month, Democrats on the Senate Finance Committee held a much-publicized hearing during which they dressed down Tillerson, and the heads of four other major integrated oil companies, over the tax preferences their companies receive.

There’s no question that big, integrated oil companies like ExxonMobil are making lots of money. In the first quarter, ExxonMobil reported profits of $10.65 billion. But Obama and many of his fellow Democrats apparently believe that only politically favored companies like GE are entitled to make big profits.

GE’s first-quarter profits totaled $3.6 billion. But Immelt wasn’t called on the Senate carpet. ConocoPhillips’ CEO Jim Mulva was, even though Mulva’s company reported a smaller first-quarter profit -- $3 billion ?-- than did GE. Obama and the Democrats are demonizing Big Oil even though GE paid zero U.S. income taxes in 2010, despite having generated some $5.1 billion in U.S. profits.

How does that compare with Tillerson’s company? ExxonMobil paid $1.6 billion in U.S. income taxes in 2010. And the company figures its total taxes and duties to the U.S. government came to some $9.8 billion last year.

Obama likes GE so much that he appointed Immelt to head the President’s Council on Jobs and Competitiveness. Jeff has a plum spot in Obama’s kitchen Cabinet even though his company is setting new standards for corporate welfare.

GE is a major backer of the $2 billion Shepherds Flat wind project in Oregon. GE and its partners are getting a $1.1 billion loan guarantee from the federal government. In addition, the companies will share in a $500 million cash grant, courtesy of U.S. taxpayers.

The federal largesse toward GE was so egregious that some of Obama’s top advisers objected to the deal. An Oct. 25, 2010, memo by Larry Summers, Carol Browner and Ron Klain pointed out that total equity being provided by GE and its partners amounted to just “11 percent of the project costs, and would generate return on equity of 30 percent.”

Rex’s company is vilified for making “record profits.” But Jeff’s company can pay zero income tax, collect huge subsidies, get fabulous returns on its equity, and better still, get a top assignment in the Obama administration.

Obama promised “change we can believe in.” Alas, he’s only promoting cynicism. Just ask Rex.

Robert Bryce is a senior fellow at the Manhattan Institute. His fourth book, Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future, just came out in paperback.

Original Source:



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