Big Oil’s Corporate Welfare: Doing The Numbers
Yesterday, Alex Knapp at Outside the Beltway and Kevin Drum at Political Animal proposed getting a grip on tax proposals for the oil industry. As Drum put it: “[F]orget a windfall profits tax, let’s work first on getting rid of the massive corporate welfare infrastructure we’ve constructed for an industry that really, really doesn’t need it.”
Like Alex, Kevin couldn’t find the numbers behind Big Oil’s subsidies:
If I spent several months on this topic instead of half an hour, maybe I could figure this all out, but surely someone else has already done this?
Alex and Kevin, the Think Progress Wonk Room rides to your rescue.
In its report “Federal Financial Interventions and Subsidies in Energy Markets 2007,” the U.S. Energy Information Administration estimated that FY 2007 subsidies for the oil and natural gas industry totalled $2.1 billion. Center for American Progress Action Fund fellows Sam Davis and Daniel Weiss identify the worst of these tax loopholes and lost royalties that involve Big Oil:
The bipartisan Energy Advancement and Investment Act of 2007 had several provisions to close tax loopholes and recover royalties from big oil companies. These provisions would raise $25.9 billion over 10 years by:
- Modifying Section 199 to exclude gross receipts from the sale of oil and gas from the domestic production deduction. Raises $9.4 billion.
- Modifying Section 907 to eliminate the distinction between foreign oil and gas extraction income and foreign oil related income. This would combine foreign upstream and downstream income into a single oil basket for foreign oil and gas extraction income purposes. Raises $3.2 billion.
- Extending the oil spill liability trust fund tax through 2017, and increase it from 5 to 10 cents per barrel. Raises $2.7 billion.
- Recovering forgone royalties by establishment of an excise tax on removal price of taxable oil or gas from federal waters in the Gulf of Mexico. Raises $10.6 billion.
A significant bipartisan majority of the Senate voted for these provisions as an amendment to the Senate energy bill on June 21, 2007, but it fell two votes short of the super majority of 60 votes needed to end debate and pass the amendment.
Eliminating the entire “massive corporate welfare infrastructure” for Big Oil is a much weightier task, of course, entering into the realm of overall corporate tax policy. The Wonk Room has done extensive analysis of Sen John McCain’s (R-AZ) corporate tax proposals and how they would benefit Big Oil.
As economist Reuven S. Avi-Yonah writes in a Wonk Room report, Sen. McCain’s “economic stimulus plan” involves a $1.7 trillion increase in corporate welfare by cutting the corporate tax rate from 35 to 25 percent and by allowing first-year expensing of equipment purchases — a potent new form of tax sheltering.
Domestic Policy Advisor James Kvaal has written in the Wonk Room that the cut in the corporate tax rate alone would deliver about $3.8 billion in tax cuts a year to the five largest American oil companies:
Memo To Bush: ‘Magic Wand’ Not Needed To Deal With Gas Prices
Memo To Bush: ‘Magic Wand’ Not Needed To Deal With Gas Prices
President Bush said Tuesday that he has no “magic wand” to affect gas prices. In reality, gas price is “all about government policy.” As the United States has some of the lowest gas taxes in the world, the price at the pump is dominated by the cost of oil:
Energy Information Administration
The rise in the price of oil in recent years involves four components:
— The effects of supply and demand. Exxon Mobil senior vice president Stephen Simon testified the supply-demand equilibrium is at “somewhere around $50-55 a barrel” — about half the current price.
– The weaker dollar. Since 2001, “the dollar has lost 45% of its value” against the euro. In 2003 one gallon of gas in the U.S. cost $1.50 and 1.50 Euro. Today’s $3.60 gallon of gas costs only 2.25 Euro.
– Geopolitical risk. Since 2003, the United States has been committed to a three-trillion-dollar war in Iraq, the heart of the turbulent oil-producing world. Furthermore, the burning of oil is continuing to increase global warming, “one of the greatest national security challenges ever faced.”
– Speculation. “Investors have looked to commodities
not only as a hedge against inflation but as a hedge against the tumbling greenback.
In recent years, the United States has gotten locked into a vicious circle in which the latter factors worsen each other. Suspending the federal gas tax would exacerbate the problem — in the words of Thomas Friedman, “we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit.”
Immediate action to deal with rising gas prices should deal with the root problems, not worsen them. Center for American Progress analysts Sam Davis and Daniel J. Weiss describe how a demand-independent “reliefbate” plan could be paid for by closing several oil tax loopholes. The Washington Post’s Dan Froomkin further recognizes that there are “two hugely significant factors” that President Bush could affect immediately: “the war in Iraq and the value of the dollar.”
But the federal fuel tax is but one brushstroke in a much broader picture. As the Center for American Progress’s energy opportunity agenda states:
The realities of global warming and our growing dependence on oil, much of it imported, will make energy more pivotal than ever to our economic, environmental, and national security fortunes in the 21st century. The challenge we face is nothing short of the conversion of an economy sustained by high-carbon energy — putting both our national security and the health of our planet at serious risk — to one based on low-carbon, sustainable sources of energy. The scale of this undertaking is immense and its potential enormous.
McCain’s Gas-Tax Holiday From Reality Continues
Two weeks ago, Sen. John McCain (R-AZ) proposed a summer-long “gas tax holiday.” Since then, he’s been faced with the challenge that such a moratorium may sound good but would be terrible policy.
When it was pointed out that the federal gas tax funds critical transportation infrastructure and jobs, a spokesman said McCain would pay the $11 billion tab from the “general revenue.”
When it was pointed out that cutting the federal gas tax would minimally affect the price at the pump, McCain then said his proposal was just “a little psychological boost.”
When it was pointed out today by MSNBC anchor Mika Brzezinski that the tax cut is an expensive and environmentally unsound policy that would do nothing to help American drivers, McCain finally erupted:
Mika, you know what? All it is is it’s not the end of Western civilization as we know it according to some, quote, economists and some around America. It’s just to give Americans a little relief.
He then exposed how out of touch he is with the realities of America by saying:
I think it’s obvious that the lowest-income Americans drive the furthest and probably they spend more on gasoline because of the age of their automobiles.
In fact, lowest-income Americans drive the least, and most of the benefits of the gas-tax holiday would go to high-income Americans.
No amount of bluster can disguise that this proposal — just as it was when Sen. Bob Dole proposed a similar gas tax holiday as the Republican presidential nominee in 1996 — is a violation of the responsible economic principles Sen. McCain has formerly espoused.
UPDATE [5:30 PM]: Michael Bloomberg, the mayor of New York City, tells the Observer a gas tax holiday “would help Chavez, Qaddafi and other people like that.” He also said:
It’s the dumbest thing I’ve heard in an awful long time from an economic point of view. I don’t understand why you think there’s any merit to it whatsoever. We’re trying to discourage people from driving and we’re trying to end our energy dependence. We don’t do that — oh, and incidentally, we’re trying to have more money to build infrastructure. All three of those things go fly in the face of giving everybody $30 a year. The $30 bucks is not going to change anybody’s lifestyle. The billions of dollars that we would otherwise have in tax revenues can make a big difference as to what kind of a world we leave our children.
Big Oil: ‘Together, We Can’ Ignore Climate Change
Big Oil: ‘Together, We Can’ Ignore Climate Change
The American Petroleum Institute (API), the trade organization for the oil and natural gas industry, has just begun running a feel-good commercial that argues “America’s future” lies in drilling out domestic reserves of oil and natural gas off our coasts, in our western lands, and in the Arctic National Wildlife Refuge. Here’s what the ad says:
Oil and natural gas powered the past. But the future? Fact is, a growing world will require more. 45% more by 2030, along with greatly expanding alternatives. We have substantial oil and natural gas resources right here. Enough to power 60 million cars and heat 160 million households for 60 years. With advanced technology and smart policies, together we can secure America’s future. Log on to learn more. [TEXT: EnergyTomorrow.org / The People of America’s Oil and Natural Gas Industry]
Watch it:
The “facts” in Big Oil’s ad are based on a thirty-six page API document entitled, “The Truth About Oil and Gasoline.” This “primer” was published last week, with numerous figures and charts on oil company profits and gas prices, but nary a single mention of climate change or greenhouse gas emissions. Here are the facts Big Oil left out:
Future With 45% More Oil And Gas Demand Involves 60% More Global Warming Emissions. The projection of “45% more by 2030″ gas and oil demand is drawn from the International Energy Agency’s (IEA) World Energy Outlook 2007 report. The API accurately describes the increase in global oil and gas demand in the IEA’s business-as-usual scenario, although United States demand is only projected to increase by less than 5%. However, API fails to mention the business-as-usual scenario also predicts energy-related carbon emissions would “increase by almost 60%” by 2030.
Business As Usual Spells Catastrophic Future. The IEA business-as-usual scenario would put the planet on a pathway to “temperature change at equilibrium of about 4.9 to 6.1 degrees C [8.9 to 11°F] compared to pre-industrial levels.” That’s five to seven times as much warming as we’ve already experienced, and would make catastrophic global change — including mass species extinction, crop devastation, and significant sea level rise — unavoidable.
Big Oil Ignores The ‘Secure’ Scenario. The IEA’s report includes a “450 Stabilisation Case,” in which greenhouse emissions are limited such that atmospheric concentrations stabilize at 450 parts per million of CO2 equivalent — what the IPCC calculated is need to avoid catastrophic climate change. In this scenario, total global oil and gas demand only increases by 10 percent from current levels, not the 45 percent that API says the world will “require.”
The ad’s tag line, “Together, we can secure America’s future,” mimics the We Campaign climate activism spot that concludes: “Together, we can solve the climate crisis.” The path Big Oil envisions — even as warning signs increase — would instead destroy the future of America and the rest of the planet.
Bush Makes Saudi Arabia Disappear
At a press conference today with the leaders of Canada and Mexico, President Bush was questioned about the continuing record prices of oil — now $118 a barrel — and the effect on the economy. He blamed Congress for not giving oil companies access to the “neglected hydrocarbons” in the now-melting Arctic and continued:
And now we’re becoming as a result becoming more dependent on foreign sources of oil. Fortunately, Canada and Mexico are our biggest providers, for which we are grateful.
Watch it:
This is not the first time Bush has celebrated Canada and Mexico’s oil imports — in March he claimed that “we get most of our oil, by the way, from Canada and Mexico.”
Bush’s statements would be true — if Saudi Arabia and other OPEC nations were wiped off the map. While Canada is the greatest exporter of crude oil to the United States, Saudi Arabia is a close second. Mexico is in third place, and has been since August 2007. Combined, Canada and Mexico provide about one-third of U.S. oil imports, while OPEC nations provide more than half. Bush’s solution to the problem of American demand fueling “the financial engine of radical Sunni Islam” is to pretend Saudi Arabia doesn’t exist.
Transcript: Read the rest of this entry »
Confused Again: McCain’s Gas Tax Holiday Violates His Own Principles
Confused Again: McCain’s Gas Tax Holiday Violates His Own Principles
Sen. John McCain’s (R-AZ) “pandering” proposal for a “gas tax holiday” is smart politics but bad policy. A few months ago, Sen. McCain seemed to understand that.
When asked at the January 10, 2008 GOP debate what the government should do to respond to the looming recession, McCain responded:
We need to stop the spending. And that way we can get our budget under control and we can have a — basically a strong, fundamental fiscal underpinnings.
The second thing that we need to do, of course, is stop spending $400 billion a year overseas to oil-producing countries that come right out of our economy immediately. Some of that money goes, unfortunately, to fund terrorist organizations.
We’ve got to — and we can use Detroit for this, where there’s tremendous technology in the state of Michigan, and tremendous abilities to develop technologies to reduce this dependency on foreign oil, and eventually eliminate it, and stop this outflow of some $400 billion a year. Education and training is obviously important, but stop the spending.
How does McCain’s proposal to suspend the federal gas tax from Memorial Day to Labor Day violate those precepts?
McCain’s Holiday Would Cost $11 Billion. Suspending the gas tax — whose revenues are fully dedicated the federal highway trust fund that maintains our crumbling infrastructure — for three months would cost $11 billion. McCain has not said how — or if — he would replace those revenues. [CAPAF, 4/15/08]
McCain’s Holiday Sends More Money ‘Out Of Our Economy Immediately.’ The Wall Street Journal notes “Many economists have also questioned the wisdom of suspending or cutting gas taxes; doing so, they say, simply stimulates more consumption of gasoline.” In McCain’s own words, that increased consumption would send more money “out of our economy immediately” to oil-producing countries, “unfortunately, to fund terrorist organizations.” [WSJ, 4/15/08]
Cutting Transportation Investment Kills Jobs. The Wall Street Journal asked: “Relief — or fewer jobs? According to a white paper circulated on Capitol Hill last week by the U.S. Transportation Department, every $1 billion of federal highway investment supports 34,779 jobs.” McCain’s plan could put over 300,000 workers on an unpaid “holiday.” [WSJ, 4/15/08]
McCain’s Holiday Threatens ‘Fundamental Fiscal Underpinnings.’ McCain spokesman Brian Rogers said “general revenue transfers” would pay for the “holiday” — increasing the budget deficit by $11 billion. As Matthew Jeanneret, a spokesman for the American Road & Transportation Builders Association, says: “It might be good politics. But it is shortsighted, and it won’t do anything to stimulate the economy.” [MSNBC, 4/15/08]
McCain’s plan would push gas prices up and force policymakers to choose between killing jobs and infrastructure investment or blowing up the budget.
Oil Industry Apologists Declare ‘We Like Oil,’ ‘Be Thankful,’ ‘Don’t Blame Oil’
Oil Industry Apologists Declare ‘We Like Oil,’ ‘Be Thankful,’ ‘Don’t Blame Oil’
Following a contentious Congressional hearing on record gas prices this week in which oil executives defended their record profits by saying they “are working darned hard,” apologists for the oil industry are attempting to convince people not to invest in a sustainable future.
Mark Davis, substituting for Rush Limbaugh on the Limbaugh radio show, claimed Congressman Ed Markey was “raping these guys rhetorically” at an “obscene” hearing. Davis defends the oil industry:
And all these guys are trying to do is get us more oil because we like oil. Everybody wants to run our cars on baby shampoo or cornpone or whatever. Well, if, if a car’s developed that works the same way, runs the same way, has the same horsepower then maybe we’ll think about that. Until then alternative fuels will remain a fringe pursuit.
Listen:
That’s not quite “all these guys are trying to do.” The oil industry spends hundreds of millions of dollars a year on Congress, front groups, and public relations campaigns to block any policies that would lessen our reliance on oil or worse, reduce their tax breaks and government subsidies.
Glenn Beck used his CNN soapbox to tell America, “Be thankful for big oil,” and offered an almost entirely incoherent defense of the companies, admitting that they “make a lot of cash” but that they “get ambulances to the hospital” because of capitalism’s incentives. In Beck’s world, oil companies don’t just need record profits and multi-billion-dollar tax breaks — they should also be getting more gratitude from the American people. He goes on to attack the government:
I’ve yet to see what our government does for us with their rather large chunk of each gallon of gas we buy, and I’ve yet to see them offer to return it or suggest a gas-tax-windfall-tax-tax.
Beck’s inability to “see what our government does for us” is simply evidence of willful blindness. Our government plows all revenues from the federal gas tax into highway and mass transit maintenance and development. And “their rather large chunk” in fact isn’t– as the price of crude oil has skyrocketed but the federal gas tax has remained unchanged, the amount of a dollar of gas that goes to the government has plummeted from 32 cents in 2000 to 13 cents today.
American Petroleum Institute president and CEO Red Cavaney used a USA Today column to tell Americans: “Don’t blame oil companies.” Cavaney also argues that the Democratic plan to roll back billions in oil-company tax breaks to pay for renewable energy incentives that are under the threat of expiring this year, putting “$19 billion of investment and 116,000 jobs in the US at risk.” This plan has been filibustered repeatedly in the Senate by Big Oil’s allies, most recently by a single vote:
These taxes would move us in the wrong direction by taking away income that could be reinvested in more oil and gas.
Caveney is literally arguing that it is the “wrong direction” to take money from oil and gas development and give it to people willing to invest in renewable energy and energy efficiency — reducing our addiction to fossil fuels. The only ones for whom that is the wrong direction are the oil companies themselves, who seem determined to drill faster to climate catastrophe.
Bush-Exxon Flak Claims Global Warming Debate Is ‘Environment Vs. Economy’
Bush-Exxon Flak Claims Global Warming Debate Is ‘Environment Vs. Economy’
Kenneth P. Green of the American Enterprise Instute (AEI) graced yesterday’s Washington Post opinion pages with a piece entitled “It’s Not Easy Being Green.”
Green claimed the differences between the global warming plans of the presidential candidates are questions “about stringency and method” — “stringency” being Green’s scare-word for doing what science says is necessary to avoid climate catastrophe. Throughout the piece Green reiterates the tired claim that solving global warming means choosing between the environment and the economy, saying:
The eternal tension of environment vs. economy has been largely pooh-poohed by environmentalists in recent years of high-flying economic performance, but it will not be as easily waved away with the U.S. standing at the threshold of a recession and with the U.S. automotive sector in serious competitive trouble.
The only thing “green” about Kenneth Green is his name. In 2007, he offered scientists and economists $10,000 each on behalf of AEI, “to undermine a major climate change report” from the United Nations Intergovernmental Panel on Climate Change (IPCC).
AEI is part of the Exxon machine. Lee Raymond, the ExxonMobil CEO who received a $400 million golden parachute upon retirement in 2005, is on the AEI board of trustees. AEI has received $1,870,000 in funding from Exxon since 1998, and its fellows include Dick Cheney’s wife Lynne, torture advocate John Yoo, and neoconservative architects of the Iraq war like John Bolton, Richard Perle, Fred Kagan, and Paul Wolfowitz.
The true choice in the global warming debate is between the gray fossil-fuel economy and a green sustainable economy. As Van Jones of Green For All described to Grist:
There’s no way to get changes big enough to solve these problems without creating pathways out of poverty for millions of new green-collar workers. The renewable economy is more labor-intensive, less capital-intensive; therefore, there should be a net increase in jobs. There will also be lots and lots of money made. So beyond just having African-American kids be the workers in a green economy, we also want them to be inventors and investors and owners and entrepreneurs in the green economy.
Green For All is now hosting the Dream Reborn conference in Memphis, Tennessee, marking the 40th anniversay of Dr. Martin Luther King Jr.’s assassination, “to bring together a generation of new leaders who are taking on the chief moral obligation of the 21st century, building a green economy for all.”
To find out more about how Americans are working together to build the green economy, read the Center for American Progress series, It’s Easy Being Green.