Exxon Shareholders Suffer a Windfall Loss of 13.7%

Exxon's (XOM) record profits and its possible "windfall profits" have received a lot of media attention recently - do a Google search for "Exxon's record taxes" or "Exxon's windfall profits" and you'll find several hundred thousand results for either. Do a Google News search for "windfall profits tax Senator Obama" and you'll find hundreds of links to news stories where Senator Obama has proposed taxes on Big Oil's "windfall profits."

CEP's Dean Baker explains here what windfall profits are (according to him), and why the government should act to prevent windfall gains.

In all of the discussions about Exxon's windfall, record profits, which are owned ultimately by Exxon's shareholders, nobody ever discusses how Exxon shareholders have been doing lately. So let's ask the question: With oil and gas prices at record recent highs (rising 50% this year), with Exxon profits at record highs, how is the average Exxon shareholder faring?

Well, not too well really. If you had bought one share of Exxon at the begining of the year, you would have paid $94, and you would have received a $0.35 dividend in Febuary, and $0.40 dividends in May and August, for a total of $1.15 in dividends this year. Exxon is now selling for $80 (see chart above), so your annual return this year from holding Exxon stock would be -13.7%, and a $1,000 investment in Exxon on January 1 would now be worth only $863. Seems like more of a windfall loss than a windfall gain for Exxon shareholders.

Comments

[The World's...:]

I think the energy sector is done unles Gustav devastates the gulf.

2008 Aug 31 09:31 AM

[ignorant:]

XOM's share price is declining because production is declining and reserves are not growing. Oil and gas companies are valued based on reserves and production.

2008 Aug 31 10:11 AM

[scorp1on:]

The windfall profits derive mainly from capital gains resulting from the Iraq war and threats against Iran, and only with stock prices up 100%+, depending on which oil company one is invested since 2003. The profits were driven up on the supply and speculation side by the government on our dime when Bush started the war for the oil companies and dollar hegemony.
Since the government has spent 100s of billions of borrowed money fighting the war and the war has given the oil companies trillions, collectively, in gains, there is no reason why the US government should not tax the oil companies for their windfall since 2003 and recoup some of that money. Looking at short term gains is a short-sighted analysis of how these gains were derived.

2008 Aug 31 10:35 AM

[erniem:]

I agree. We should also windfall tax Ford, GM, all the insurance companies and every hedge fund, in fact every stock out there, as they all benefit in some way from gubmint interference. In fact let's take them over and nationalize everything and appoint a committe to run them.

2008 Aug 31 11:49 AM

[WEBISKING:]

I bought the 50 strike price in january 2010 for an averae cost of 29 dollars and am up about 7% in the past couple weeks.My guess is we will see a spikebecauseofgustav and I will make about 15% in less thahn month.Exxon is agreat buy under 78.peace

2008 Aug 31 12:06 PM

[tigris72poo:]

Exxon and all the other oil companies pay royalties that are a fixed percent of the price of every barrell of oil they produce. So the government gets just as much as a windfall from eising prices as the company. Furthermore, these royalties come right off the top. Then after paying all their expenses ( for drilling rigs, steel, chemicals etc.which are rising faster than the price of oil in many cases) they pay income tax on what is left. So the governement gats it's take twice: off the top line and out of the bottom line.

Also, who is to say what is a windfall? The technology, tobacco, soft drink, drug and entertainment companies (to say nothing about lawyers) make higher profits as a percent of revenue or capital invested than the oil companies.

Finally, if you want more of something (energy independence anyone?) you tax it LESS not more.

Those who are in favor of the government deciding what is a windfall and how we should tax it, should move to North Korea or Cuba and see how well socialism works.

2008 Aug 31 02:22 PM

[cmborg:]

Punishing companies by taxing them for making a profit defeats the principles of free enterprise and capitalism. Obama needs to take a course in Economics 101. I don't appreciate the high cost of fuel any more than the next guy, but you cannot blame the oil companies for world supply and demand, especially when our legislators have made it so difficult for the oil companies to increase supply by disallowing them to open up proven reserves for drilling.

Windfall profits would be better utilized by these companies to research alternative fuel technologies than by padding the government bank account for programs that make no sense whatsoever.

Lastly, if you are going to assess windfall profit taxes on companies, do it across the board. How about the pharmaceutical industry???? I think they make a pretty hefty profit!

2008 Aug 31 05:32 PM

[Lazy Al:]

I'm not sure I understand your point here.

Exxon's shareholders haven't done well in the past four months--but it the past four years they've doubled money excluding dividends.

Perhaps a retroactive windfall profits tax could be imposed.

2008 Aug 31 09:25 PM

[CLH:]

Senator Obama is a total fool and only other fools would expect him to say anything intelligent.

2008 Sep 01 09:15 AM

[unimpressed...:]

I believe a windfall profits tax would be declared unconstitutional. It flies in the face of the basis of a capitalist society and our freedom to do business without onerous government restraints. Businesses are formed to make as much profit as possible. Only gouging should be examined and punished. And, that would result in criminal charges not illegal taxes.

Of course, if you vote for Democrats (socialists) all bets are off.

2008 Sep 01 09:26 AM

[Pinkivory:]

How do we get the press to tell the people?

2008 Sep 01 11:58 AM

[yank:]

scorpion:
US dollar hegemony? I think you better check your Funk & Wagnalls. The USD is DOWN over 25% in value since 2003. There is nothing "hegemony" about that.

2008 Sep 01 01:18 PM

[LoveShorting:]

But scorpion has in fact nailed the most important answer in this country today - - why W started an unnecessary war. Thanks for that (can we prosecute him for murder now? please? Cheney too?)
Ernie - - stop, please. Those other companies are not evil.
CLH - - A fool? How many books have you written? And are you telling me McCain is not a fool? Have you seen the photo of McCain hugging Bush? There's no fool like an old fool and he's old.

2008 Sep 01 07:06 PM

[Lazy Al:]

Instead of criticizing and penalizing the oil industry you should be thanking them.

If our source of oil was seriously disrupted, the United States would descend into total anarchy within a matter of days, if not hours.

I hope Exxon moves their headquarters to Kazakhstan and tells you all to make your own goddamn gasoline.

2008 Sep 01 07:30 PM

[jjason:]

OPEC and Big OIL have paid themselves very very well since 1974.

You and I have been suckers.

Mark Perry is comparing apples to BS.

And as for Senator Omaba, he is the best hope for our country in the next four to eight years. The OBAMA /Biden ticket will concentrate on ALL forms of alternative energy.

I listened to President Bill Clinton talk to us ( in Jim Thorpe, PA. ) this summer about clean coal.

Coal is available in PA and I hope to see more clean coal technology soon.

Also, see OIL SPECULATION FOR DUMMIES at:

www.stopoilspeculation.../

and sign the petition.

OIL IS POLITICAL FOLKS.

OBAMA / BIDEN 08

2008 Sep 02 08:14 AM

[WEBISKING:]

Exxon has put big money in the US traesury and "penalizing" them witha windfall tax is foolish

2008 Sep 06 05:25 AM