Democrats Eye Oil's Record Profits
Web Editor, "Mad Money"
It’s no secret that Democrats are looking to tax major oil companies in the U.S. It was one of the party’s platforms during the recent midterm elections. But the cries are getting louder after Thursday’s record-setting profits reported by Exxon Mobil . Why subsidize the most profitable industry in the U.S.? Both sides of the issue made their case on “Morning Call.”
Rayola Dougher of the American Petroleum Institute says the subsidies and tax breaks oil companies enjoy are vital to keeping them competitive in the world market. Not to mention, she points out, Exxon actually paid over $100 billion in taxes in 2006. And as maker of only 3% of the world’s oil, the company is trying to compete with its nationalized counterparts in Saudi Arabia and Venezuela.
Tyson Slocum of the Public Citizen’s Energy Program scoffs at that idea of oil companies getting government help.
“Why on earth are U.S. taxpayers continuing to subsidize the most profitable industry in the U.S. economy?” Slocum asks. “That may have made sense when oil was 15 bucks a barrel, but it’s about $55 a barrel right now. These subsidies should not go to a mature, profitable industry like oil.”
Slocum would rather see federal support go to companies perfecting energy efficiency, an industry with growing importance as scientists become more and more sure that burning fossil fuels is causing alarming effects on the earth’s climate.
But taxing profitable companies hasn’t worked before, and it isn’t going to work now, says Dougher. She called the Windfall Profits Tax of the early ‘80s a “dismal failure” because it resulted in less investment in U.S. companies, less production on the whole in the U.S. and more imports.
“It’s exactly the wrong direction to go,” Dougher says. “If you charge extra taxes and fees on the oil industry, consumers end up paying. And our oil companies become less competitive on the international marketplace.”
Slocum closed the segment by saying that investment in the U.S. by oil companies has nothing to do with subsidies or tax breaks. It’s the market price of oil – and that’s going to continue to be strong. So why not invest in sectors more worthy – and in need – of assistance?