Last week the Senate voted against taking away massive tax breaks that we gave to oil companies many years ago. The original reason for the tax breaks was to make sure they had enough funds, and to encourage them, to partake in research and exploration. They have a substantially lower tax rate than any other industry.
Do they still need these breaks? The figures for the first quarter of 2011 show that Exxon, BP, Shell, Chevron and ConocoPhilips combined for a staggering, record high $38.1 billion in profits. That’s a full 38 percent higher than last year’s record profits.
These companies receive about $4 billion a year in tax breaks. The bill wouldn’t even get rid of all of that; it actually only targeted $2 billion of it. Even that was too much for the Senate to pass. All the Republicans voted against it, along with three Democrats.
The rescinding of the tax breaks would accomplish a number of things. Over the next 10 years, it would raise $21 billion in a time when fighting deficits is a major issue, that all politicians, especially Republicans, claim is their major focus. It also creates fairness, since other industries face a higher tax rate than the oil industry.
The industry, meanwhile, claim there are good reasons for the tax breaks. First and foremost, they accuse Congress of picking on the oil industry for being too successful, and that they already pay a good amount of taxes. It rewards exploration for new sources of oil, as well as the development of alternative energy. It helps create jobs, and in fact, they claim getting rid of the tax breaks will cause employees to have to be laid off.
But the biggest argument the Republicans make is their old stand-by, that in essence it is raising taxes, and raising taxes is not acceptable, no matter who it is or how much profit a company is making. And they fully believe that taking away tax breaks, whether or not they are still necessary and no matter the effect on the deficit, constitutes raising taxes, and that will not be tolerated.
There are a few facts that belie these arguments. The biggest is that the money they make is not being spent on what the tax breaks are supposed to encourage. There are no major outlays for new exploration or research in alternative energy sources. In 2010, almost 60 percent of the profits went to buying back company stock from shareholders. This boosts their share prices and gives them greater control over the company. Less than 4 percent was spent on renewable and alternative energy ventures, and 18 percent on exploration.
Now I’ll let you in on the real reason for these massive tax breaks. Here are some numbers that people should look at. ChevronTexaco, $8,550,000; ExxonMobil, $7,140,000; ConocoPhillips, $5,098,084; Marathon, $4,290,000; BP, $2,880,000; Occidental, $2,042,177; Shell, $1,478,831; Ashland, $904,000; and Sunoco, $540,000. The Industry total for 2010? $33,173,092.
What are those figures? Those are the amounts the oil companies have donated to the members of Congress for their campaign funds. And here’s an eye-opener… in just the first quarter of 2011, when this bill was coming up for a vote, they donated $17.9 million.
And the reason for the lopsided Republican voting? The five biggest oil companies gave 97 percent of their contributions to Republicans in the first quarter of this year. In 2010, 83 percent of their contributions went to them. And the leaders of the party were well rewarded. Speaker John Boehner, House Majority Leader Eric Cantor, House Majority Whip Kevin McCarthy, House Energy and Commerce Chairman Fred Upton, and House Ways and Means Chairman Dave Camp—all of them Republicans—were major recipients.
Why do we put up with this? It’s unbelievable that we let this go on. There should be a public outcry against that fact that the oil industry can “buy” tax breaks from our Congress. Is that fair? If you had billions of dollars, you could do the same thing. It’s a travesty that no one seems ready to address. We need the President, or leaders of Congress who have some sense of decency, to speak out and make the public aware of these numbers. They are public knowledge, but they are treated as a “family secret” among politicians. This needs to stop if we’re going to have any semblance of responsible government.
Another issue that is arising is the fact that the price of a barrel of oil has gone down recently. Yet, prices at the pump have hardly nudged. It’s almost like the oil companies are trying to get us used to high prices, so when it goes down by a few cents, we’re happy. It’s the American way; that’s the way capitalism works. You charge what the market will bear.
However, that assumes there is real competition in the marketplace. With all the profits the oil companies are taking, you would think that a company like Exxon might lower prices, in order to get consumers to prefer their product. But it hasn’t happened. Don’t give me all the malarkey about prices being set by speculators. If Exxon wanted to lower their price, they could.
This smacks of collusion among the companies. And, in fact, Missouri Senator Claire McCaskill, New York Senator Charles Schumer and Senator Harry Reid of Nevada, have asked the Federal Trade Commission to review allegations of potential wrongdoing by oil companies. The Energy Information Administration said last week refineries were using only 81.7 percent of their capacity. Refineries are also exporting more gasoline. It does not make sense for refineries to have low production levels and also export record amounts of gasoline when U.S. prices are high. “Sounds like a recipe to keep prices high. We don’t know if this is a smoking gun but it sure requires a close look,” Schumer said.
Don’t expect the inquiry to get anywhere. As sure as it now costs you $50 to fill your tank, the oil industry has our politicians in their hip pocket.