(Photo: Amoil Resources & Technology)
Responding to proposals by various Democrats,
including President Obama, right-wing media have over the past few days claimed that eliminating various tax subsidies now received by oil and gas companies will drive up the price of gasoline at the pump. However, queries of energy experts by
Media Matters show the premise to be false. Moreover, not only would getting rid of the subsidies have little or no impact on gas prices, neither would a windfall profits tax like the one Rep. Dennis Kucinich (OH-10) plans to
reintroduce in Congress next week.
First introduced in 2005 as the Gas Price Spike Act, Kucinich's bill would tax "excessive profits" of refineries and distributors, direct the revenue to tax credits for Americans who buy super-efficient vehicles and to promote rail transit between and within urban areas. The 2005 bill died in committee.
Meanwhile, following up on statements made by Senate Majority Leader Harry Reid at a press conference Wednesday, Sen. Max Baucus announced a plan Thursday that would end tax breaks for the five largest oil companies. This would include the domestic manufacturing deduction established in 2004 and a reduction in the tax credit for royalties oil companies pay to foreign governments. An excise tax would also be levied on some leases in the Gulf of Mexico. Revenue captured by the plan would be spent on promoting development of cleaner fuel as well as incentives for buyers of efficient vehicles and builders of infrastructure, such as alternative energy fueling stations.
No revenue estimates are included with the Baucus plan. President Obama's proposal would cover all oil-and-gas producing companies and generate $18.3 billion over a decade.
The highly influential American Petroleum Institute, which has in the past successfully lobbied against cuts in oil tax breaks, had harsh words for the Baucus plan, calling it "a proposal borne of desperation that would do nothing to reduce gasoline prices."
API chief economist John Felmy said in a statement, "If Senator Baucus were serious about gasoline prices, he would focus on further development of our vast resources here at home which would create much needed American jobs, increase revenue to the government, and strengthen our energy security."
Claims this week from Fox News, National Review Online, RedState and other right-wing media that ending tax breaks would boost gasoline prices was disputed by, among others, Michael Canes, a distinguished fellow at the Logistics Management Institute and former chief economist of the American Petroleum Institute. In an e-mail to Media Matters, he wrote that ending subsidies to oil companies would have "very little" effect on oil prices. He said that there could be:
"Some small effect if at the margin domestic production is adversely affected, but I suspect that effect would be very small indeed. Personally, I'd like to see an end to ALL energy subsidies, but that's another issue entirely."
Severin Borenstein, co-director of U.C. Berkeley's Center for the Study of Energy Markets, cutting subsidies to oil companies said:
Gasoline prices are a function of world oil prices and refining margins. The oil companies are quick to point out that they are not to blame for oil prices because the price is set in the world market, or which they are a small share. That is all true. But one implication of that is that the incremental change in production that might result from changing oil subsidies will have no impact on world oil prices, and therefore no impact on gasoline prices.
Recent studies by the Joint Economic Committee of Congress and the Congressional Research Service agree with those assessments. In addition, a 2008 CRS study, Energy Tax Policy: History and Current Issues, found that neither of two types of windfall profits tax would "have significant price effects: neither tax would increase the price of crude oil, which means that refined petroleum product prices, such as pump prices, would likely not tend to increase."
Not one chance in a million that such fact-checking will alter the bogus message the right is determined to hammer into American brains. Maybe one chance in a million that the House of Representatives will ax these subsidies or impose a windfall profits tax. But that doesn't make the efforts a waste of time. Democrats should force a vote anyway to get everyone on the record.
