The Senate minority who last week blocked a vote on ending Big Oil subsidies receivedmore than four timesthe oil and gas contributions than the 51 senators voting to end them. Exxon Mobil, the world’s most profitable corporation, has helped preserve these and other loopholes for oil and gas by building a Washington force tied intimately to conservative lawmakers,Steve Coll reports in this week’s New Yorker. The corporation relies on an algorithm to determine tiers of oil industry allies and sent90 percent of contributionsto Republicans last year.
Lacking the same connections it had from the Clinton and Bush administrations, Exxon’s strategy has shifted in Washington to pursuing a “blocking strategy” that thwarts climate and tax reform legislation:
During both the Bush and the Obama Administrations, ExxonMobil has concentrated its efforts in Washington on preventing certain tax and regulatory bills from being enacted, such as Obama’s proposal, this winter, to strip away industry tax advantages.The corporation has invested mainly in a blocking strategy, focussing its PAC donations on Republicans who can try to assure that no damaging laws go through.“Whoever’s in power in the House has almost dictatorial power,” a Washington consultant who has worked on oil-industry issues says.“If you control what’s going on in the House, you have huge influence over the final” legislation, as well as over the budgets and spending mandates that shape regulation.”
In the past decade, the leading recipient of ExxonMobil PAC contributions has been Representative Joe Barton, a Republican from Texas, who has held senior positions on the House Energy and Commerce Committee, where most legislation affecting the oil industry originates. Anne Northup, a former Republican congresswoman from Kentucky, who now serves on the Consumer Product Safety Commission, received the second largest amount of campaign money.ExxonMobil’s ten leading campaign contribution recipients in that decade were all House Republicans, according to research done by the journalist Ann O’Hanlon.
Exxon is the largest political contributor in the oil and gas industry, spendingnearly a millionso far in the 2012 election cycle and another$12.7 millionin 2011; it alsofundscorporate front group American Legislative Exchange Council (ALEC). The strategy has paid off for Exxon, which made35 percent higher profitslast year on higher gas prices, yet paid a lower federal tax rate of an estimated 13 percent.
Republicans have beentrying to pin the blamefor the recent rise in oil prices on President Obama, relying on the false claim that if Obama just allowed more drilling for oil on U.S. lands, prices would magically decline. Speaker of the House John Boehner (R-OH) has “instructed fellow Republicans to embrace the gas-pump anger” as they push for more drilling.
Many experts, though, have pointed out that its not for a lack of drilling that oil prices are increasing, butrampant speculation in oil markets. Michael Greenberger, a former regulator at the Commodity Futures Trading Commission (CFTC) who oversaw the futures markets, told McClatchy that the increase is due to “excessive speculation” on the part of Wall Street:
“It is similar to the gambling Wall Street did on whether or not people would pay their subprime (below-market rate) mortgages in the mortgage meltdown,” said Michael Greenberger, a law professor at the University of Maryland and a former federal regulator of financial markets. “Now they are betting on the upward direction of the price of oil” … “It is excessive speculation, which is a fancy word for saying that gamblers wearing Wall Street suits have taken these markets over,” he said.
The Obama administration has said that it will crack down on excessive oil speculation, but it’s oil speculation task force hashardly done anything at all. The CFTC, meanwhile, has been slow to implement new rules designed to rein in speculators that were a part of the Dodd-Frank financial reform law. Democrats have beenpushing the agencyto begin that enforcement.
April 05, 2012 5:22 pm ET by Jocelyn Fong & Shauna Theel
To protect the $4 billion of annualtax breaks for oil and gas companies, which President Obama has repeatedlyproposedeliminating, Fox News has been offering up every conceivable defense, and in the process has completely tied itself in knots.
Foxdeclaresthat the tax preferences benefitting oil companies are not "subsidies" since they are not direct payments. But the network previouslycalledtax credits for electric cars "subsidies." (Fox also says thatMedia Mattersis "subsidized" because we are atax-exemptorganization.)
Fox insists we shouldn't cut the tax incentives for oil because they make up only a fraction of our deficit problem. But when it comes to supporting clean tech, they decide we "can't afford it."
And Fox routinely uses the words "free market" when arguing against federal spending on clean energy, but that term is nowhere to be found in its coverage of oil subsidies. Instead, Fox argues that the tax preferences are "wonderful" because they "encourage" the industry to make money, pay shareholders, and hire people. While it may seem backwards to many of us, the fact that the oil industry is alreadymassively profitable(and doesn't need encouragement from the government) is, in the Fox News worldview, an argument infavorof giving them tax breaks.
that allow the rich to corrupt the political process.
trickle-up/trickle-down both hurt the little guy and are a net societal loss but a benefit to unscrupulous politicians and bureaucrats looking to increase their power hold. The only reason why Keynesian or Monetarist theories persist is because the populous is economically illiterate by design and put far too much faith in the culprits.
When anyone sends a politician to Washington to bring home the bacon they should realize that their odds of it being a net gain for them are about on par with their odds at Atlantic City. For whatever they give they'll take and then some.
Please update your Encyclopedia Britannica to something from within the past 30 years.
The Congressional Research Service states the fledgling oil industry in the United States first received government assistance in 1916. That was when intangible drilling costs were able to be fully deducted from a company's expenses for tax purposes. In 1926, a write-off for cost depletion was introduced. That provision allowed oil companies to deduct costs based upon overall gross receipts and not just the actual value of the oil.
Both of those subsidies still exist. The Obama administration claims the average subsidy for huge oil companies is $4 billion per year. The bill in the Senate would have saved $24 billion in 10 years. The White House claims when gas goes up one cent per gallon, oil companies make $200 million more per month.
The American Chemical Society cites a report by Double Bottom Line Venture Capital that explains how the oil industry has reaped benefits from subsidies. From 1918 to 2009, the average annual subsidy was $4.86 billion. By comparison, the nuclear energy industry gets around $3.5 billion per year.
When the study adjusted for inflation to 2009 dollars, the oil and gas industry received subsidies amounting to $1.8 billion per year in the first 15 years of the fledgling industry. The American Coalition for Ethanol estimates that when combined with state and local government aid to large oil companies, subsidies amount to anywhere from $133.8 billion to $280.8 billion annually from all sources of taxpayer aid that goes to the oil and gas industry.
The Obama administration contends the oil industry no longer needs help. The three largest oil companies made $80 billion in profits combined in 2011, which amounts to $200 million per day. The White House also asserts America uses 20 percent of the world's oil but only has two percent of the world's oil reserves. Oil drilling continues in all areas of the United States and oil rigs are plentiful in the Gulf of Mexico, the White House blog states.
The New York Times had an article dated July 3, 2010, in the middle of the Gulf oil spill. Deepwater Horizon rented the sunken rig to BP. The company used an oil industry subsidy to write off 70 percent of the cost of the rent for the rig which amounted to a deduction of $225,000 per day.