May 13, 2011

Big Oil defends tax breaks, massive profits

Big Oil was called before Congress yesterday to talk about high gas prices – but they spent their time defending the billions in tax breaks/credits/subsidies the industry gets courtesy of U.S. taxpayers. While mostly for show, the testimony was important to put Big Oil on the record in saying that after a century it apparently still needs government tax breaks to be successful.

While it is generally believed a bill to eliminate a stack of these tax breaks won't make it anywhere, Big Oil felt it needed to defend itself and, not surprisingly, everyone was on the same well-oiled page. ExxonMobile's CEO called the tax proposal "misinformed," "discriminatory" and "counterproductive." (Exxon, fyi, had profits of $11 billion in the first quarter of this year.)

I wonder what he has to say about incentives for the biofuels industry? And how are biofuels suppose to work their way into the system when like Big Oil controls the markets, dollars and reaps so much in terms of a tax advantage?

Of course the American Petroleum Institute (which supports tar sands oil but files lawsuits to prevent increased use of biofuels) is running TV ads trying to scare Americans into believing that "now is not the time to raise energy taxes" – and without directly saying so, essentially arguing that eliminating tax breaks for Big Oil is the same thing as raising taxes. Yet immediately eliminating the Volumetric Ethanol Excise Tax Credit (VEETC) for biofuels would do EXACTLY the same thing!

The difference is, Big Oil essentially has a monopoly on our fuel supply. Biofuels like ethanol are helping to change that. It will take time and perseverance – and the continued defense of myths and outright lies perpetuated online – but dropping the push for biofuels would be a giant step backward for the United States.

Yesterday, the Nebraska Corn Board distributed a news release that dealt a bit on the subject.

It noted that oil is in everything one way or another – from gas tanks to packaging to transporting to fabric to food – and high energy costs also significantly increase the cost of production no matter what’s being produced, from widgets to breakfast cereal.

“We’ve had very high oil prices for much of this year, and we’re all seeing it at the pump,” said Kim Clark of the Nebraska Corn Board. “Yet we’re also seeing the impact of higher energy costs in every transaction in every store because high oil prices have an impact at every step in the process for just about everything we buy. It’s taking dollars away from families and slowing our economic recovery.”

High oil prices also mean soaring profits for global oil companies – Exxon saw profits rise to $11 billion, up 69 percent from last year. Shell was up 22 percent, Chevron up 36 percent, ConocoPhillips jumped 43 percent and even BP, which is still paying for the massive oil spill in the Gulf, saw gains of 16 percent and $7.2 billion in earnings. Profits rival those in 2008 when oil hit $147 and Exxon earned more than $45 billion, more than any publicly traded company in history.

“Despite massive profits year after year, many of which go overseas, the oil industry continues to fight to keep U.S. tax breaks, tax credits and other subsidies, some of which have been in place for nearly a century, not to mention the military cost of keeping shipping lanes open,” Clark said. “How many decades do these companies need government support? Certainly we should consider the oil industry well established and able to stand on its own.

At the same time, the oil industry and its many offshoot organizations continue to bemoan any incentives for biofuels. “They promote many myths and misinformation about biofuels like ethanol, and that is unfortunate because biofuels are our only hope of diversifying the fuel supply and producing more energy here at home,” Clark said. “Instead of being part of the solution, they continue to promote false ideas that only make us more dependent on oil, even if that oil comes from the Middle East.”

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