Should Big Oil get $18 Billion in subsidies when they're making record profits?

Top oil executives said Tuesday that despite their industry's record profits, Congress should continue granting them $18 billion in annual tax subsidies and expand drilling in areas that are now off-limits. ExxonMobil Corp. Senior Vice President Stephen Simon told a House committee that "stable" tax... show more Top oil executives said Tuesday that despite their industry's record profits, Congress should continue granting them $18 billion in annual tax subsidies and expand drilling in areas that are now off-limits.
ExxonMobil Corp. Senior Vice President Stephen Simon told a House committee that "stable" tax policies "are essential to encouraging needed investments." And Chevron Corp. Vice Chairman Peter Robertson said oil companies need "greater access to U.S. resources - onshore and offshore."
Rep. Ed Markey, D-Mass., chairman of the House Select Committee on Energy Independence and Global Warming, pushed back, criticizing the oil industry for charging consumers too much while investing too little in alternative energy sources.
Noting that the five biggest U.S. oil companies' profits rose to $123 billion last year, Markey demanded, "What is the oil industry doing with all this profit?"
He said investments should be rising for technologies that would reduce U.S. dependency on oil, but "unfortunately, it goes as much to financial engineering as renewable engineering."
Markey held the hearing in response to consumers' growing anger over record-high gasoline prices, and his frustration with the lack of progress on alternatives to fossil fuels.
Since 2002 when a gallon cost $1.11, the price of gasoline has nearly tripled to $3.29. In West Palm Beach-Boca Raton, the average price Tuesday was $3.41.
"And as we approach the summer driving season, skyrocketing gas prices are likely far from over," Markey said.
"I heard what you are hearing. Americans are very worried about the rising price of energy," said John Hofmeister, president of Royal Dutch Shell.
But Exxon's Simon argued that "our earnings, though high in absolute terms, need to be viewed in the context of the scale and cyclical, long-term nature of our industry as well as the huge investment requirements."
House Democrats have twice passed legislation that would strip away the $18 billion in tax breaks oil companies now get for exploration and redirect it to development of renewable fuels and clean energy. Senate Republicans so far have blocked final passage.
With oil prices hovering at around $100 a barrel, Markey pointed to a statement made in 2005 by President Bush, who said, "With $55 (a barrel) oil, we don't need incentives for oil and gas companies to explore."
A number of Republicans on the committee raised concerns about harming oil companies by withdrawing current tax breaks, making note of the high-paying jobs the companies create.
The executives from ExxonMobil, Chevron and Shell were joined by top officials from ConocoPhillips and BP America.
Markey was particularly harsh toward ExxonMobil, saying the company should commit 10 percent of its profits to renewable energy. "Why is your company not investing in renewables?" Markey demanded.
Simon replied that his company has "studied all forms (of alternative energy), and the current technology just doesn't have an impact" great enough to significantly reduce oil dependency. To make big investments worthwhile, "it's going to take breakthroughs" in basic research being done at universities, he said.
He said Exxon has concluded that to meet its energy needs, the country will be dependent upon fossil fuels through at least 2030.
Markey wasn't buying the argument, noting oil companies have made "windfall" profits. "With that great opportunity that you have been given, there is a responsibility" to show leadership on new fuel sources, he said.
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