WASHINGTON – Senate Democrats are calling top executives from the five biggest oil companies before a congressional hearing to flog them verbally for high gasoline prices, big profits and generous tax breaks that Democrats would like to end but don't have the votes to stop.
"Why on earth, when we are supposedly working to reduce the deficit, would we be subsidizing the top five oil companies?" Sen. Robert Menendez, D-N.J., said prior to the hearing Thursday before the Senate Finance Committee. "It's time for the big five oil companies to give up these subsidies and allow their companies to pay a fair share towards reducing the deficit."
The five companies booked profits totaling $36 billion the first quarter of this year. The Democrats say that with profits that high, the big oil companies wouldn't miss tax breaks that average $2 billion a year.
"They ought to be making profits fairly, not with the kind of giveaways that they are receiving now," said Sen. Richard Blumenthal, D-Conn.
Menendez has introduced a bill that would repeal the tax breaks for the five largest oil companies — Shell Oil Co., ExxonMobil, ConocoPhillips, BP America and Chevron Corp. The heads of those companies are scheduled to testify before the Senate Finance Committee.
On Wednesday, ConocoPhillips chairman and CEO Jim Mulva issued a statement saying a tax increase would cost jobs, discourage investment and lead to even higher gas prices.
"Our industry and company are already taxed heavily compared to other industries in the United States," Mulva said.
Gasoline prices are above $4 a gallon in much of the country. The national average is about $3.96 a gallon for regular unleaded, up from $2.90 a gallon a year ago, according to AAA.
Jack Gerard, president and CEO of the American Petroleum Institute, called the tax proposal a "vindictive money grab" that could "put more people out of work in New Jersey and across America, damage our nation's energy security, raise energy costs and, ultimately, drive up deficits."
The nonpartisan Congressional Research Service concluded that eliminating the tax breaks would be unlikely to result in higher gasoline prices, which are influenced by a host of factors. The report, released Wednesday, said eliminating the tax breaks would raise about $1.2 billion in 2012. By comparison, the five oil companies had combined revenues of $1.5 trillion, and profits of more than $76 billion, in 2010, the report said.
Menendez' bill would prohibit the five oil companies from taking a tax deduction originally aimed at boosting domestic manufacturing. The bill would also eliminate a tax break that allows oil companies to reduce their American taxes by deducting royalties paid to foreign governments.
"These subsidies were passed when the price of oil was $17 a barrel, when you needed some incentive for exploration," said Sen. Chuck Schumer, D-N.Y. "With the price of oil at $100 a barrel, the only thing that keeps them in place is pure politics."
Thursday's hearing is unlikely to result in a consensus in Congress to repeal the tax breaks. President Barack Obama has called for eliminating tax breaks for oil and gas companies every year since he took office in 2009, but his budget proposals have been largely ignored by Congress, even when Democrats controlled both the House and Senate. Obama's proposal would generate an estimated $4 billion a year in additional revenue.
Republicans, who now control the House and have enough votes to block legislation in the Senate, oppose tax increases. They are joined on this issue by a handful of Democrats, mainly from oil-producing states. Seven Senate Democrats joined with Republicans to defeat a tax proposal similar to Obama's in February.
On Wednesday, Sen. Mary Landrieu of Louisiana called on fellow Democrats to "stop introducing gimmicks like this that might get you a few political points in the short run, but it is not leading us in the right direction."
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