Thirty-five members of the U.S. House of Representatives are urging Congress to end $122 billion worth of Big Oil subsidies over the next 10 years, following a similar request by a coalition of national and state organizations that beseeched the Joint Select Committee on Deficit Reduction to stop subsidizing the fossil fuels industry.
In an Oct. 14 letter to chairs U.S. Rep. Jeb Hensarling, R-Texas., and U.S. Sen. Patty Murray, D-Wash., the 35 House Democrats argued that the United States cannot afford to funnel money to corporations that earn billions in profits each year while Americans pay record-high gas prices and fund those very subsidies with their tax dollars.
Does Big Oil Need A Federal Subsidy?
The congressmen echoed the concerns of the Oct. 4 appeal, which was signed by Earthworks, the Energy Action Coalition, Greenpeace and dozens of other organizations, and concluded that fossil fuel companies hardly need handouts from the federal government since those businesses are incredibly lucrative.
With our country facing massive cuts on programs like education and healthcare, we cannot afford to waste tens of billions of dollars each year in giveaways to fossil fuel companies. By eliminating these handouts we take an important step towards putting our house in fiscal order and helping the environment at the same time, the letter states.
Continue Reading Below
Despite the sluggish economic recovery and 9.1 percent unemployment rate, the Big Five oil companies have reported record-breaking profits this year. According to second-quarter earnings reports, ExxonMobil raked in $10.7 billion during that quarter alone, a 41 percent increase from the same period the year before and an incredible 161 percent increase over 2009.
ExxonMobil was hardly alone. Shell nearly doubled its profits in the second quarter of this year, taking in about $8.7 billion, while Chevron was also up 43 percent, earning $5.6 billion. Both Exxon and Chevron spent huge chunks of company profits to buy back its own stock, a move that usually boosts share prices.
Domestic oil drilling is a mature industry and at current record profit levels, needs no subsidy, wrote the congressmen in the Oct. 14 appeal.
Fossil Fuel Companies: Many Federal Subsidies
Fossil fuel corporations currently receive multiple subsidies in the federal tax code, $43.5 billion of which goes to oil and gas companies and $2.5 billion of which goes to coal companies, both of which President Barack Obama has already suggested eliminating. Oil refineries that modify their facilities to process dirty tar sands oil costs the U.S. an additional $1.3 billion over 10 years, while broader subsidies, such as the last in, first out accounting for inventories costs taxpayers $52 billion over that same period and disproportionally serves oil and gas companies. The congressmen also proposed repealing a dual capacity tax credit that mainly benefits oil and gas companies -- a move that would save taxpayers an additional $10.5 billion -- in addition to ending royalty-free leases, which would save another $9.5 billion.
According to the congressmen, eradicating those subsidies would improve the efficiency of the country's tax code and would not add expenditures for consumers. The letter adds that the Treasury Department reports the subsidies proposed by President Obama would only reduce U.S. oil production by less than half of a percent and increase exploration and production costs by less than two percent.
Because oil and gas prices are set at the international level, and the United States is only a small producer of the world's oil, a slight increase in costs for domestic producers will not increase the price Americans pay for gas, the letter states.
In May, a Democratic measure that would have repealed tax subsidies for the nation's five biggest oil companies failed to receive the 60-vote threshold needed to clear the Senate, and prevent a Republican filibuster. The measure failed in a 52-to-48 vote, with three Democrats crossing party lines to vote against it.
However, many lawmakers likely were not voting with the interests of their constituents. In a March NBC/Wall Street Journal poll, an overwhelming majority of Americans -- 74 percent -- said they supported eliminating tax credits for the oil and gas industries as a means of lowering the federal budget deficit.