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How long will taxpayers subsidize Big Oil?

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  • In an era of gusher profits for major oil companies, the U.S. government has continued to direct billions of taxpayer dollars into oil subsidies. And when the rare attempt has been made to curb those payments, the industry’s highly-paid lobbyists and their generous contributions have managed to keep Congress in line and the Treasury tap open.

Amid the hue and cry for change in the way Washington operates and a determination by a sobered (?) Congress to cut government spending, there will be perhaps no better test of that zeal than drawing the line on subsidies to Big Oil.

In an era of gusher profits for major oil companies, the U.S. government has continued to direct billions of taxpayer dollars into oil subsidies.

And when the rare attempt has been made to curb those payments, the industry’s highly-paid lobbyists and their generous contributions have managed to keep Congress in line and the Treasury tap open.

In July, at the height of the BP oil spill crisis in the Gulf of Mexico, the Senate shot down a measure that would have eliminated some $35 billion in subsidies to oil companies. Every Republican — every single one — voted against it.

Whenever Congress has the temerity to suggest a halt to this gravy train, the lobbyists launch their litany of scare tactics: subsidies are critical to our nation’s energy security; killing subsidies will wreak havoc on the economy, cost jobs, reduce U.S. energy production, and on and on.

The Treasury Department estimates that ending subsidies would reduce domestic oil production by less than one-half of 1 percent. Despite billions in government subsidies, U.S. production has gone down steadily since the 1970s.

The non-partisan Center for Responsive Politics, which monitors political spending, reports that the oil and natural gas industry spent nearly $175 million and registered 788 lobbyists last year. Since 1998, the industry has spent $966.8 million on lobbying.

The big bullet in the lobbyists’ scare arsenal is that eliminating subsidies would cause disastrous run-ups in prices at the pump. A Joint Economic Committee report notes, however, that the removal or modification of subsidies “is unlikely to have any effect on consumer prices for oil or gas.”

The industry receives a multitude of tax breaks at almost every phase of its operations, and in many cases avoids paying U.S. taxes altogether by registering their operations in other countries. A New York Timesanalysis showed that BP escaped $1.8 billion in taxes by moving its corporate headquarters overseas from Houston.

Further subsidies have accrued to the oil companies in the form of often extremely favorable leases for drilling on government lands. A 2008 General Accounting Office study showed that of 104 jurisdictions worldwide, only 11 received a smaller portion of revenues from government leased lands than the U.S.

In a Los Angeles Times article, Bill Freudenburg, professor of environmental studies at the University of California Santa Barbara, who has studied the economics of leases for offshore drilling, says, “We were just stunned by how badly the American taxpayer has been getting screwed.”

It will be interesting to see just how firm a stand the New and Improved Congress will take on handing over more billions of taxpayer dollars to the oil companies.

Discuss this Blog Entry 2

Anonymous (not verified)
on Dec 7, 2010

That may all be true but if Congress digs into the biofuels it will be even a bigger can of worms.

Anonymous (not verified)
on Dec 10, 2010

Speaking of government subsidies to petroleum companies, don't forget to mention ethanol and the rest of the subsidies to ag in your rant. Oh I forgot, if it has to do with ag it is always OK to do it.

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