American families have been plagued by higher oil and gasoline prices over the past several years despite a significant increase in domestic oil production and a decline in consumption. But while high gas prices threaten the economy and family budgets, they enrich oil companies with huge profits. Apparently that doesn’t bother House Budget Committee Chairman Paul Ryan (R-WI), since his proposed fiscal year 2014 budget resolution appears to again keep a decade’s worth of oil tax breaks worth $40 billion for the oil-and-gas industry. Even more astounding, the budget would give the five biggest oil companies an additional multibillion-dollar tax cut by slashing the corporate income tax rate.
Rep. Ryan’s latest budget is a retread of the budget, complete with oil giveaways, that he and Republican presidential nominee and former Massachusetts Gov. Mitt Romney ran on in 2012 — and which was soundly rejected by voters in November. Hasn’t Rep. Ryan learned anything?
Big Oil companies continue to rake in the profits, while gasoline prices have risen by 38 cents since January 1 of this year — an 11 percent increase. What’s more, the Energy Information Administration reported that U.S. households spent an average of $2,912 on gasoline in 2012. This is the highest level in four years, equivalent to nearly 4 percent of the average household income before taxes. Last year the average gasoline price was $3.66 — a dime more than the previous record set in 2011. Time magazine reported in December that “2012 will go down as the most expensive year ever for gas.”
While higher gasoline prices cause families pain at the pump, they are a boon to the world’s largest oil companies. The big five oil companies — BP, Chevron, ConocoPhillips, ExxonMobil, and Shell — made a combined record profit of $118 billion in 2012 on top of a record profit of $137 billion in 2011. These companies also have a total of nearly $72 billion in cash reserves. Yet under the Ryan budget, it seems that the big five oil companies would continue to benefit from their $2.4 billion share of the $4 billion in annual tax breaks for all large oil and gas companies.
In addition to the apparent retention of these existing special tax breaks, Rep. Ryan’s FY 2014 budget explicitly includes the Romney presidential campaign’s economic plan proposal to cut the corporate income tax rate from 35 percent to 25 percent — nearly a one-third reduction. That could provide an additional combined tax cut of at least $2.3 billion annually to the big five oil companies, according to an analysis of their 2011 public financial statements. That includes $1.5 billion for the three domestic oil companies and $800 million for the two foreign-owned companies. Since it is of course impossible to predict their future profits, this estimate is based on their 2011 financial data, including their U.S. federal income tax expense.
Of course Big Oil and the American Petroleum Institute, their wealthy lobbying organization, trot out a number of specious arguments to keep existing tax breaks in place, such as: