Energy experts: Don’t look to Congress to lower gas prices this summer

The latest Democratic effort to raise taxes on oil and gas companies by eliminating credits and write-offs might make people feel better about hitting back at companies that charge big money for a gallon of gas, but it will do little to lower the cost, and could even lead to higher prices, energy policy experts say.

The recent spike in gas prices has reignited the battle over oil and foreign energy dependence, while both parties spring into action with bills they say will address the rising costs. Republicans are using the high prices to call for increased drilling permits for oil companies, while Democrats want to eliminate $4 billion in credits and write-offs in the tax code for oil companies while increasing government spending on alternative energy companies like wind and solar.

As for timing, President Obama called for eliminating the tax credits just before the nation’s largest oil companies reported record profits. Over the past ten years, the top five largest companies have made more than $1 trillion in profit, unwelcome news for American families that have seen gas costs cut into their budgets this year.

“When oil companies are making huge profits and you’re struggling at the pump, and we’re scouring the federal budget for spending we can afford to do without, these tax giveaways aren’t right,” Obama said during his weekly address on Saturday. “They aren’t smart. And we need to end them.”

House Democrats will force a vote on ending certain loopholes Thursday.

But what can actions from Washington to cut tax loopholes for oil companies actually do to lower gas prices now?

“In the short term, the answer is nothing,” said Charles Ebinger, director of the Energy Security Initiative at the Brookings Institution. “It wouldn’t be the end of the world, but it would have a negative impact on the economy overall.”

Democrats last month seized upon comments from Republicans, especially House Speaker John Boehner of Ohio and House Budget Chairman Paul Ryan of Wisconsin, who appeared to voice support for ending the tax credits to oil companies. (Boehner’s spokesman quickly released a statement clarifying his remarks, saying he does not support ending the current tax policy.)

But the White House has been unclear about the reason for removing the subsidies. Obama spokesman Jay Carney said last week that the president believes that the nation “can’t afford” tax credits to oil companies, but then said that Obama would spend the money to subsidize other energy companies, not deficit reduction.

“That money should be invested in clean energy,” Carney said. “Especially when the oil and gas companies, especially the big ones, show absolutely no need for taxpayer subsidies.”

Democrats in Congress and the White House aren’t the only ones with big plans for the potential new revenue they would get from changing the tax rules for oil companies. Daniel J. Weiss, senior fellow and director of climate strategy at the liberal Center for American Progress, said the funds should be used for public transportation projects, which he said would give gas consumers more choices in the future to soften the pain of the next gas price spike.

“You’re helping people deal with high gas prices by giving them an option,” Weiss said.

  • bozsbusiness

    I want to know the TOTAL tax from the gas and oil industry including employees fed, state, local, sales, property and ad infinitum they contribute to all of government.
    Then I want to know how much those employees are contributing to Oblahmah’s disastrous “green initiative.”
    Cap and Trade my @$$, we need a taxPAYER revolt!!!

  • SoapyJohnson

    The “Jed Clampett Time Travel Theory” will tell you all you need to know … http://placeitonluckydan.com/2011/04/gas-prices-rapin-everybody/

  • CJT1957

    Next they will decide that Walmart is making too much money. It would be fair to have them pay Tax on the Gross Profit instead of their Net Profit….. Fair if you want prices to skyrocket…..

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  • EscapeFromCalifornia

    Slamming Big Oil is a coded expression meaning ‘we screwed up and don’t know what to do now’. Our representatives are so brave – slamming production and profit, threatening investigations and indictments, and taking the oil company money by the bucket for the next election.

    Sure, end the subsidies. But don’t make me choke on dinner by taking the money you saved in these tough times and using it to shove pixie dust energy solutions on us. Cut all the subsidies to all industries. Lose the wasted billions on ethnanol fantasies, price protection for favored ag businesses, special deals for special favorites like GE and the banks, and get out of the business of ‘investing’.

    We are in a mess because some idiots in Washington convinced a large number of us that they actually know something useful. They are supposed to protect us so we can pursue our own interests, not consume us like cattle. But in the name of economic fairness, of ecological justice, of rectifying an endless list of prior sins, our pols have bankrupted the country and shoved our industry offshore.

    Time to try something we haven’t tried in 90 years – stop spending, stop legislating, stop rule-making, stop being so damn smart. Washington needs to sit down and take an eraser to the 91,000+ pages in the federal register, and being to investigate itself for malfeasance. No one on either side thinks the government is competent or even honest any more. Time to clean it up and shrink it down to a manageable size that can protect us, but not control us.

    We are on the edge of an economic calamity. Picking on oil – with it’s large dollar but small percentage profits is playing a fool’s game at a time when we need wisdom and boldness.

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  • Scrap Iron

    There is an easy way to end all of these tax breaks.
    Pass the Fair Tax.
    Then there are no taxes to be “written off”.
    Simple, huh?

    • CJT1957

      I do ageer we need a faitax system. Th subsidies they are talking about are costs of production. No different than reducing the tax charge to a store for the cost of goods sold…

  • nycon

    I will agree to stop the tax breaks for so called “Big Oil” when we stop ALL TAX Breaks. Like Ethanol, Wind, Solar Farms, Dairy, etc. Stop all of them now!

    • designerrant

      I agree!

  • thephranc

    Congress should cut the tax breaks and cut the taxes. Those record profits by big oil are small compared to the profit big government made at every level on the same gallon of gas.

    I really wish these oil company articles would have a break down of just where each penny goes. Than people would see who is really sticking to them at the pump and it aint the oil companies.

    • CJT1957

      True. Exxon made about 2cents per gallon on gasoline. Average state and federal tax on that gallon is 48cents, deisel fuel is 53cents per gallon….