Executives of the five largest oil companies operating in America — ExxonMobil, BP, Shell, ChevronTexaco and ConocoPhillips — testified last month before the House Select Committee on Energy Independence and Global Warming. As we all know, the oil companies are raking in record profits. Crude oil consistently has exceeded $100 a barrel and a gallon for gasoline will soon cost $4. The oil industry executives tried to explain why they should continue to receive billions of dollars in subsidies and tax breaks from the American people when the money could be better spent on renewable energy and energy efficiency investments needed to combat climate change. Their answers were pretty weak and not at all convincing.
Oil companies are spending more on stock buybacks than capital investment and that makes no sense. Oil exceeding $100 a barrel should provide the industry with all the incentive necessary to re-invest in energy infrastructure. But since 2005, the largest five oil companies have had cumulative profits of $345 billion and spent $252 billion buying back stock and paying dividends to shareholders. In addition, these companies are sitting on $53 billion in cash. In 2007, ExxonMobil spent $3.34 billion on capital expenditures in the United States, while spending 850% more — $31.8 billion — buying back stock. If the oil industry is unwilling to use $100 a barrel oil to make necessary investments in this country, then Congress is justified in revoking recently awarded tax breaks worth billions of dollars.
Tax breaks slated for repeal were enacted during a period of record profits. The primary Big Oil giveaway that H.R. 5351 targets for repeal was enacted into law in 2004. By freezing the domestic production deduction only for major integrated oil companies, Big Oil companies will rightly be denied $13.6 billion in tax breaks over the next decade. In addition, the legislation would close a loophole that allows some oil companies with foreign operations to pay substantially less in U.S. taxes. Closing this loophole will require oil companies to pay $4 billion more to the U.S. Treasury over the next decade.
Energy futures markets where prices are set must be re-regulated. Two regulatory lapses are enabling anti-competitive practices in energy trading markets where prices of energy are set:
In October 2007, BP agreed to pay more than $300 million to settle allegations that the company manipulated American propane futures markets. Closing the “Enron Loophole” to restore transparency and reduce speculative abuses will help bring down prices. It’s high time for Congress to protect the American people from the powerful oil industry. The “tail has been wagging the dog” when it comes to the federal government and the oil companies for much too long and that trend must be reversed.
Source: Public Citizen
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