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 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.
- CaninelegionLv 71 decade agoFavorite Answer
Profits are short lived in the energy industry as it is extremely cyclic and is misleading. Much of the so called profits go into research on finding better ways to find energy sources, upgrading equipment that has been neglected for 20 years of low profits, and in actually finding new energy sources. Profits should not be a consideration in subsidies as they are a tool that insures a level playing field in the international market. Ideally, in a free market system, subsidies are not needed but as long as other countries do so, so must the USA.
- 1 decade ago
The reason oil companies are making record profits is because the value of the dollar is so low. Oil is over 100 dollars a barrel tripling in the past 8 years. Meanwhile their wages haven't tripled. The real story here is that the price of Oil and the profits of the Oil companies are a result of the very weak dollar and failed policies of the Fed by printing more dollars that lower the buying power of each dollar. The price of gold and oil have increased by almost the same percent, reflecting that instead of blaming oil companies for milking us of cash that we should point fingers at the government which has made our currency worth so much less and as a result made us poorer. Until we realize that any action we take will be either harmful or ineffective.
- anna sLv 41 decade ago
No, they don't need the subsidies at all. Their CEOs are making record salaries as it is so of course they would argue for it to continue since that's part of their jobs. As far as needing further expansion for drilling, that might help a bit. One of the issues with drilling for oil is how much has been cut off because of the tree huggers that influenced Clinton before he left office. Renewable energy is necessary however I don't think we are at a point where the technology & methods that we have can currently be depended on to take any % of the oil addiction away.
Of course, all of the massive SUV's in the country being switched to compacts would help the rapid consumption & therefore the price but that doesn't seem to happen either.
- 1 decade ago
It is popular yet naive to think that we should just cut off their subsidies and tax breaks. Of course they do not deserve them, however, they will still make the same profits, instead of from the Gov't, it will cause them to pass the increase on to the consumer as an increase in prices, Gasoline , home heating fuels, etc.
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- Bob HLv 71 decade ago
It's just another way that the real government taxes citizens.
- mary kLv 61 decade ago
They are full of crap. Big oil makes money. I wish someone would give $30 for a new pair of walking shoes-due to high gas prices-I take the bus now. THANKS MR DOOSH BAG BUSH!!
- AnonymousLv 71 decade ago
This is what you call business-govt corruption at the expense of the ordinary taxpayer.
- Anonymous1 decade ago
anything to improve the bottom line.
- 1 decade ago
Corporate bloody welfare!
- cynsationalLv 41 decade ago
Doesn't that suck?