If there was a defining moment at Thursday's wide-ranging Senate Finance Committee hearings with executives from the world's five largest private oil companies, it came when Sen. Ron Wyden of Oregon played the above video from 2005. In it oil company executives agreed that they had no need for continuing tax subsidies with oil going for $55 a barrel, more than four times what it had been selling for just a few years previously. Currently oil is selling at nearly $100 a barrel and the five big oil companies are raking in profits that are likely to hit a record this year. At the same time, the oil industry is saving
$4.4 billion on its annual tax bill thanks to subsidies.
Wyden said: "You all said you didn't need them in 2005. You seem to be telling a different story today."
That ought to have wrapped it up right then and there. But, with the dutiful assistance of Sen. Orrin Hatch, the execs defended themselves and their subsidies against Democratic criticism. And they rejected a Democratic proposal that would repeal a number of those tax breaks.
If the proposal were to pass, it would bring in about $2 billion a year into the Treasury at a time when both political parties are focused on reducing the government deficit. John Watson, chairman and CEO of Chevron, said there shouldn't be selective taxation and the oil giants should get the same breaks as other industries get. Taking away subsidies, he and the other top execs from BP, ConocoPhillips, ExxonMobil and Shell said, would hurt their competitiveness, cost jobs, reduce their incentive to explore for more oil and not reduce the cost of gasoline. Neither he nor they called the breaks "subsidies."
As he had promised Wednesday, Sen. Robert Menendez, one of the sponsors of the tax break repeal, asked James J. Mulva, chairman and CEO of ConocoPhillips, to apologize for a press release calling a repeal of the tax break "Un-American." But Mulva refused, saying he had meant no offense."Our industry and company are already taxed heavily compared to other industries in the United States," he said.
Sen. Chuck Schumer then asked any of the executives who believed the "Un-American" accusation to raise his hand. None did. They do, after all, pay for good coaching from their press relations squads.
Near the end of the hearing, Sen. Jay Rockefeller said what he had heard convinced him that the executives are "out of touch" with average Americans. "The main reason you're out of touch … is that you never lose. You've never lost. You always prevail in the halls of Congress. … [You are] "deeply and profoundly committed to sharing nothing."
And despite the vigor with which the Senators on the committee excoriated them, they seem likely to prevail this time as well despite considerable unhappiness among Americans over rising gasoline prices, now a nationwide average of $3.96 a gallon and growing fury over the billions in subsidies poured out to the companies at a time when politicians are whacking or preparing to whack programs like Medicare and local governments are laying off teachers and firefighters. While some Republicans have said they would consider ending at least some tax breaks for Big Oil, they have couched this in terms of overall tax reform, elements of which many Democrats will reject outright.
Some energy state Democrats, like Sen. Mary Landrieu of Louisiana and Mark Begich of Alaska, have indicated they are unlikely to go along with the tax break repeal. Begich said Wednesday:
“Let’s stop this headline grabbing and get serious about energy security,” Mr. Begich said in a floor speech Wednesday afternoon. “There is a lot of talk right now about ending tax incentives for the oil and gas industry. But the high profits of these companies are easy targets. One thing Alaskans know is just because you have an easy target doesn’t mean it is the right thing to shoot. It won’t decrease prices at the pump for our families and small businesses.”
One thing the oil companies are no doubt right about is that repealing the tax breaks would not reduce the price of gasoline. But contrary to what Sen. Hatch and the companies have previously said, either on their own dime or through the American Petroleum Institute, ending the breaks would not raise gasoline prices either. The Congressional Research Service issued a report Wednesday stating as much, and many other studies have shown likewise.
Nor would it harm production. Treasury’s Alan B. Krueger told a congressional subcommittee in 2009 that
cutting tax incentives to the oil industry would raise costs by less than 2 percent and lead to a reduction in output of only one half of one percent. The United States produces about 10 percent of the world’s oil supply and holds less than 2 percent of global reserves. Since oil is a globally-traded commodity, a small drop in U.S. production would have an even smaller effect on the global price of oil.
Cutting oil-company subsidies isn't a substitute for creating the far-sighted comprehensive energy policy focused on efficiency, conservation, renewable sources of power and electrifying the transportation system. But if the revenue raised were redirected toward pressing forward some of those needed objectives, it would at least show that Congress is serious about getting us off the dead-end, fossil-fueled path we are headed down.