Oil industry execs grilled over tax benefits

May 13th, 2011 by Staff

WASHINGTON — Despite record profits and consumer angst over gas prices approaching $4 nationally, oil industry CEOs say they still need billions in federal tax breaks to keep prices from rising further.

CEOs from ExxonMobil, Chevron, ConocoPhillips, BP America and Shell told a Senate Finance Committee on Thursday that gas prices could go up if tax breaks on domestic drilling and other costs are rescinded.

Senate Democrats, trying to eliminate the deductions to reduce the federal deficit, responded angrily, “I think you are deeply, profoundly out of touch,” Sen. Jay Rockefeller, D-W.Va., told the CEOs.

More than two dozen Democrats are backing legislation to remove the tax incentives. Senate Majority Leader Harry Reid, D-Nev., is expected to call a vote next week, although the measure has little chance of getting the 60 votes needed to overcome a Republican filibuster.

Nationally, regular gas averages $3.98 a gallon, up $1.08 from a year ago. But it is over $4 in 17 states, and in some it has passed the $4.11 record set in July 2008.

Republicans insist the Democratic drive to end tax benefits would push prices even higher.

Democrats’ energy policy “is to increase the cost of energy,” Sen. Orrin Hatch of Utah said during the hearing, which he called “political theater” and a “dog-and-pony show.” Hatch, ranking Republican on the committee, displayed a picture of a dog sitting on a pony.
But Sen. Max Baucus, D-Mont., noted that the five oil producers had production costs of just $11 a barrel in 2010. “Today, oil prices are almost 40% higher, which would increase these large profit margins even further,” Baucus said. The five posted $35 billion in first-quarter 2011 profits.

Industry leaders say the tax benefits are similar to those the government provides other industries. Moreover, the executives say, their firms have to risk a lot of capital to find new oil supplies.

“The oil and gas industry pays its fair share in taxes,” Chevron CEO John Watson said.

A 2009 study co-written by economist Stephen Brown of the University of Nevada-Las Vegas found that eliminating the tax incentives would cost most consumers about $2 a year.

“The impact would be extremely small,” Brown said.

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