Exxon's Tax Bill

A lot is being written about Exxon Mobil's Q1 2008 earnings of $10.9 billion, the second largest quarterly profit ever for a U.S. company. What is not receiving as much attention, but more than I expected - at least in the blogs, is how Exxon incurred a tax bill of $9.3 billion. When overall international taxes are consider, the tax figure is even more staggering, and increasing at an alarming rate. Adding in sales and other taxes (countries are defining their own ways to profit from oil), total taxes were closer to $29.3 billion.

Exxon in effect paid $3 in taxes for every $1 of earnings. Even with these numbers, we will continue to hear about how higher taxes, and even windfall profit taxes, are needed for the oil companies. Of course, when you tax something you typically get less of it, which may be the point for some, but certainly not an energy plan. Decreased supply will increase prices at the pump.

As for the stock itself, it was down after missing earnings. The street was expecting earnings per share of $2.14, while Exxon delivered $2.03 per share. While high taxes certainly contributed to Exxon's lower than expected earnings, decreasing crack spreads have hurt refiners and other integrated oil companies, such as Exxon. Oil company margins are also not as large as other industries (such as software), squeezing profit margins when costs, such as taxes and commodities, increase.

Ticker: XOM