Big Oil: What's Good for Us Is Good for You
What’s good for Big Oil is good for America.
Or at least that’s the message from Big Oil this week, as five major oil companies prepare to unveil quarterly earnings numbers that are expected to show major profits at a time when Americans are facing rising gas prices at the pump.
But the Obama administration has another take: If the oil companies are doing so well, maybe they ought to give up about $44 billion worth of federal subsidies over the next ten years.
President Obama ratcheted up his push Tuesday with a letter to Republican and Democratic congressional leaders asking them to remove the subsidies.
"Our outdated tax laws currently provide the oil and gas industry more than $4 billion per year in these subsidies, even though oil prices are high and the industry is projected to report outsized profits this quarter," Obama said.
The Obama administration now has an unlikely potential ally on that front: Republican House Speaker John Boehner of Ohio, who said this week that he’s open to reexamining the oil company subsidies even if he’s not ready to commit to axing them just yet.
What’s going on in Washington this week is a battle to frame the debate before the blockbuster numbers become public.
Start with the American Petroleum Institute, which released a study Monday looking at just how good rising oil company stock prices have been for American public pension funds.
The study looked at four key states, and found that oil and natural gas stocks made up 3.9 percent of the public pension holdings there. But they’re solid performers: They accounted for 8.6 percent of the returns in these accounts from 2005 to 2008.
In other words, Americans may hate paying more at the pump, but they’re going to love collecting more in their pensions.
“Oil companies are not owned by space aliens, as some people would argue in Washington,” said API’s chief economist, John Felmy. “They’re owned by tens of millions of Americans who have their IRAs, 401(k)s and pension funds invested in the companies.”
But President Obama’s top spokesman, press secretary Jay Carney, is clearly hoping the earnings reports provoke another reaction among American voters.
At the White House briefing Monday, he said, “When Americans are going every day of the week to their local gas stations and filling up and seeing a tank of gas cost $60, $70, $80 or more, I think they would be appalled to learn that major oil companies — oil and gas companies — will be announcing record profits this week, in the tens of billions of dollars in some cases.”
The Obama administration has called for the elimination of eight separate oil industry subsidies — everything from the enhanced oil recovery credit to the deduction for tertiary injectants — for a total savings of $43.6 billion over 10 years.
“I think most Americans would agree with the President that it’s simply crazy and unsustainable to continue to subsidize the oil and gas companies when we need to reduce our deficit and invest elsewhere,” Carney said.
The API, for its part, dismisses the White House’s argument: "That’s just Washington political spin,” said Felmy. “The reality is the proposals they have are to increase taxes."
He added, "The tax provisions that we have are basically the same for many, many other industries but they’ve singled out the oil companies for specific punitive treatment. It's nothing more than a repeat of mistakes in the past when they raised taxes on the industry, reduced production, increase imports and then poured the money down the drain on things that didn’t work."
Caught in the middle of all this is Speaker Boehner, who does not want Republicans painted as the party of big oil at a time when Americans are increasingly angry about gas prices.
That’s why the Speaker told "ABC World News" that the government needs money, and Big Oil "ought to be paying their fair share."
"We certainly ought to take a look at it," Boehner said of repealing Big Oil’s tax breaks. "We're at a time when the federal government's short on revenue. We need to control spending but we need to have revenue to keep the government moving."
This is a messaging battle that’s only going to heat up Wednesday morning, when BP and ConocoPhillips report earnings.
Exxon Mobil and Shell follow suit on Thursday, and Chevron reports on Friday — which means we’ll see a whole week of political battles over the high price of oil, and the high profits of oil companies.