03.28.12

Statement Of Senator Patrick Leahy On The Repeal Big Oil Tax Subsidies Act

Statement As Prepared For Delivery

Mr. President, it is long past time to close the wasteful tax loopholes for Big Oil.  Over the past 10 years, the five biggest private sector oil companies -- BP, ExxonMobil, Chevron, Shell, and ConocoPhillips -- have amassed combined profits of almost $1 trillion.  Last year was no different.  Due to skyrocketing prices for oil, these same five corporations raked in a record-breaking $137 billion in profits.  Despite this massive windfall, Big Oil continued to receive billions of dollars in taxpayer subsidies – subsidies that are unnecessary and, in my opinion, unconscionable.  The Repeal Big Oil Tax Subsidies Act will eliminate these harmful subsidies and level the playing field for all Americans. 

Big Oil does not need these big tax breaks, and the prices they set for consumers at the pump suggest that they don’t appreciate them.  As of March 22, the national average price of regular gasoline is over $3.88 per gallon – up almost $0.34 from a year ago.  I need look no further than the prices at the pump in Vermont, where the average price for a gallon of gasoline is $3.85 – up approximately $0.30 from the average price in March 2011.  This price increase is especially burdensome in rural states like Vermont, where people must often rely on cars to get around, and heating fuel is a life-or-death necessity in the winter.  For every penny that the price of gasoline increases, big oil companies make an additional $200 million per quarter. 

In spite of their ever-increasing profits and unneeded subsidies, the five major oil companies have done absolutely nothing to bring down prices for average consumers.  Instead, they have padded their own pockets, using the vast majority of their net profits to pay exorbitant dividends, repurchase stock, lobby government officials, and buy radio and newspaper advertising to fight this bill.  These actions benefit elite oil company executives and the companies’ largest stockholders, but do nothing whatsoever to ease the pain of hardworking Americans who trying to commute to their jobs every day or heat their homes during the long winter months.

This bill will halt the transfer of money from hardworking middle class families to oil company fat cats by ending more than $2 billion in annual tax breaks.  It is a watershed moment for both energy policy and deficit reduction, and I support it whole heartedly.  Eliminating these wasteful tax breaks that benefit a few, undeserving companies will allow us to reinvest in clean energy technologies that will benefit everyone.  These investments will improve our national security by making the U.S. less dependent on foreign oil.  They will also strengthen our economy and create new green jobs for the large number of Americans who are currently out of work and facing hard times. 

Specifically, the Repeal Big Oil Tax Subsidies Act would renew incentives for clean energy technologies and put America on the path to energy independence.  In order to break free from our unhealthy addiction to oil, we must choose the President’s “all-of-the-above” energy strategy which will grow clean energy industries, including alternative fuel vehicles, advanced manufacturing, biofuels, and solar, to name just a few.  Savings from repealing these tax subsidies for Big Oil will help continue important incentives for alternatives to oil and usher in a bright new future of energy independence.

In addition to the benefits that we will receive from investing in clean energy technology, the remaining savings from this bill will be dedicated to reducing the national deficit, a goal shared by both Democrats and, supposedly, Republicans.  Time and again we have heard seemingly impassioned rhetoric from Republicans about the need to balance the budget and reign in spending.  And yet, when given the chance to end more than $2 billion per year in unnecessary tax breaks, Republicans have stood with Big Oil.  Instead of standing with Big Oil, we need to stand up to Big Oil.

For years, Republicans have opposed efforts to end taxpayer subsidies to the major oil companies.  However, lavishing these giant corporations with incentives they do not need merely deepens our deficit and takes money out of the pockets of hard working families, money which could be spent growing the economy and hastening our recovery.  The Repeal Big Oil Tax Subsidies Act is precisely the action we should take to ensure that oil companies pay their fair share to help lower the deficit, just as working class taxpayers do. 

It is important to note that cutting these subsidies will not result in less oil production or an increase in prices.  Expert analysis has revealed that it costs the big five oil companies only about $11.00 to produce a single barrel of oil.  This amount is dwarfed by the current price of a barrel of oil, which has consistently hovered around $110 per barrel.  At today’s prices, oil companies regularly earn $100 in pure profit from each barrel of oil that they sell.  In fact, the former Chief Executive Officer of Shell Oil Company, John Hofmeister, has admitted that, in his point of view, high oil prices made subsidies unnecessary.  Therefore, it is highly improbable that a small change in tax subsidies would reduce their output.  Furthermore, because oil is a global commodity, any incremental change in production that might result from changing oil subsidies in the United States will likely have no impact on world oil prices and, therefore, no impact on the price of oil.

The Senate should also go one step further and once again pass the No Oil Producing and Exporting Cartels Act (NOPEC), which I have filed as an amendment to today’s bill, along with Senator Kohl and others.  We must do everything we can to ensure that oil prices are not artificially inflated, driving up gas prices at the pump.  Our NOPEC amendment will hold accountable those who engage in collusive behavior that artificially reduces supply and increases the price of fuel by allowing the Justice Department to crack down on illegal price manipulation by oil cartels.  This illegal manipulation affects us all. As long as OPEC’s actions remain sheltered from antitrust enforcement, OPEC’s member-governments will continue to have the ability to wreak havoc on the American economy and their destructive power will remain unchecked.

The benefits of the Repeal Big Oil Tax Subsidies Actshould be obvious to all Senators.  An overwhelming majority of the Americans, 66 percent, have said that repealing tax subsidies for Big Oil is an acceptable way to help reduce the deficit.  I would go further.  Not only is this an acceptable way to reduce the deficit, but in these lean times when so many are struggling to make ends meet, it is an essential way to bring the budget back in line.  It is time to end Big Oil’s free ride at the expense of taxpayers.

Going forward, our focus should be on 21st Century clean energy that powers a jobs boom and fuels our economy.  If these tax breaks were ever justified, that day has long passed.  The Repeal Big Oil Tax Subsidies Act will end the unjustified federal subsidies for the biggest oil companies that are enjoying record profits at the expense of working families.  It will propel us into the future by investing the savings in clean energy technologies and reducing the federal deficit. 

Senators must make a choice:  stand with the American people and stand up to Big Oil or continue business as usual?  I think the choice is clear, and strongly support this bill. 

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