The Obama administration has, once again, proposed cutting the billions of dollars in taxpayer subsidies that are given every year to Big Oil companies (often for activities that they would have undertaken anyway). Republicans in both the House and the Senate are, once again, going to bat for the oil companies, as they have over and over for the last couple of years, calling an attempt to cut subsidies a “proposal to raise skyrocketing gas and energy prices and destroy American jobs.”
“In the face of sustained high oil prices it was not an issue—for large companies—of needing the subsidies to entice us into looking for and producing more oil,” John Hofmeister told National Journal Daily…“The fear of low oil prices drives some companies to say that subsidies should be sustained,” Hofmeister said. “And my point of view is that with high oil prices such subsidies are not necessary.”
In an age of deficit hysteria — where Republicans are proposing cuts to food programs for infants, trade assistance, job training, community health centers, and a host of other programs providing work and security to Americans across the country — oil companies have so far emerged unscathed. Even with oil prices clearing $100 per barrel, billion of dollars are uncritically turned over to oil companies.
Republicans assert that removing the subsidies will cause job loss and an increase in oil prices. However, according to the Office of Economic Policy at the Department of Treasury, cutting the subsidies would affect domestic oil production by less than one-half of one percent. In fact, the United States produces about the same amount of oil now that it produced in the 1950s, despite billions in subsidies that were handed out over the past 30 years.
As for prices at the pump, the Joint Economic Committee looked at one particular tax subsidy — which was intended to preserve U.S. manufacturing jobs but is continually claimed by oil and gas companies — and found that, “In the long run, the removal or modification of the tax deduction is unlikely to have any effect on consumer prices for oil and gas.” Job loss from removing the subsidies is also likely to be minimal, since there would be little change in production.
Other Big Oil CEO’s — like Exxon’s Rex Tillerson — have vigorously defended the subsidies, even as they made astronomical profits. The five biggest oil companies alone — BP, Chevron, ConocoPhillips, ExxonMobil, and Shell — “made a total profit of nearly $1 trillion over the past decade.”