America is its own worst enemy. The highest costs by far to the oil industry is in its upstream exploration and production. It is also where royalties are applied. The higher the royalties the less money there is for exploration and production. The oil companies could shut down there entire upstream operations and import 100% of their oil for their midstream refinery operations. At the midstream level margins are only about 2 1/2 %. The loss of course would be to millions of jobs and lost investment.

SOME FACTS
Investment and Other Uses of Cash Flow by the Oil Industry
Today's oil and natural gas industry earnings are invested in new technology, new production and environment and product quality improvements to meet tomorrow's energy needs. A new Ernst & Young study shows the five major oil companies had $712 billion of new investment between 1992 and 2007, compared to net income of $705 billion during the same period. The industry overall, which includes 41 of the largest U.S. oil and natural gas companies, had new investments of $1.17 trillion over the same period, compared to net income of $974 billion and cash flows of $1.74 trillion. High oil and gas prices in recent years increased oil and natural gas companies’ cash flows from operations and net income, which facilitated record levels of investment spending.