GOP: Gas & Oil Party. Oil companies preserve profits as gas prices rise.

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CENK UYGUR, HOST: Good evening. I‘m Cenk Uygur.

Today we saw 10 billion reasons why the oil companies‘ rigged game in Washington is not working for the American people. Exxon Mobil reported $10.65 billion in profits through just the first three months of this year. That‘s up 69 percent from last year.

These obscene profits were fueled by rising gas prices. Regular hit $3.88 a gallon today. The earnings make a mockery of oil industry claims that they need $4 billion in corporate welfare checks handed out to them each year by the federal government.

President Obama says these tax breaks and subsidies add up to a massive redistribution of wealth with taxpayers on the losing end.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: For $4 billion, we could do an awful lot. And you know where we could get $4 billion? By ending taxpayer subsidies we give to oil companies and gas companies.


That‘s profits coming from your pocket into their pocket. They‘re making enough profit.


UYGUR: Here-here. Preach it. Teach it.

Now, the Republican response? Drill, baby, drill. Oh, for God‘s sake. Come on, man.

So, next week, they‘re going to start working on bills to fast-track drilling permits in the Gulf of Mexico and expand leasing areas off the coast, all with an eye toward doubling oil production in the Gulf over the next five years. That way, oil companies can make even more money.

Hey, by the way, have they shared benefits with you guys? I mean, since they are making so much in profits, they must have given you a break on gas prices. Right?

They haven‘t? That‘s weird. I thought the Republicans told me that if we give the largest corporations in the world huge tax breaks, somehow you would benefit.

Instead, you got incredibly high gas prices. Hmm. Strange.

Unsurprisingly, people are furious about these subsidies, and now Republicans are facing real pressure to roll them back. Remember, for one magical moment this week even John Boehner seemed to be in favor of ending the subsidies. Of course, he quickly backpedaled on that when his staff reminded him who signs his checks.

Now, none other than Paul Ryan is also feeling the heat. Check him out today at a town hall in this video from Think Progress.


UNIDENTIFIED MALE: The subsidies for the oil companies that the federal government gives, they‘ve got to stop.


UNIDENTIFIED MALE: End the oil company subsidies.

RYAN: I agree.

UNIDENTIFIED MALE: You will gain a lot of that money in the red back.

RYAN: Right.


UYGUR: You agree? That‘s strange. Why did you vote against ending the oil subsidies twice then?

Ryan says he agreed, but he also went on to talk about tax loopholes and shelters, not subsidies. So, is he playing word games here? Probably, because you know who he works for. He works for the oil companies.

Now, a similar thing happened to GOP Congressman Denny Rehberg, who was grilled on the subject at a town hall on Tuesday.


REP. DENNY REHBERG ®, MONTANA: Everything is on the table as far as I‘m concerned, and that would be—the subsidies for oil companies would be one of them.


UYGUR: Now, Rehberg also voted twice this year to extend the tax breaks for big oil. Now he‘s having second thoughts all of a sudden. He doesn‘t like how those town halls are going. People are on to his game.

So are several other GOP lawmakers, including Georgia‘s Tom Graves and South Carolina‘s Mick Mulvaney. All of a sudden, they‘re all having second thoughts. Fascinating, how that works.

Now, Democrats in both the Senate and the House are now fighting to schedule votes on these subsidies and force Republicans to go on the record once again defending big oil. I like that strategy, because if I was them, I would tell the Republicans, go ahead, do it. I dare you.

Tell us why the American people need to give $4 billion in welfare to these gigantic oil companies. I double dare you.

Well, joining me now is Congressman Peter DeFazio. He‘s a Democrat from Oregon. He‘s part of the people daring them. He‘s a member of the Natural Resources Committee and a member of the Progressive Caucus. Also with us former labor secretary Robert Reich, now an economics professor at Berkeley and the author of “Aftershock,” which, lucky for you, is just out on paperback.

All right.

Congressman DeFazio, let me start with you. What‘s your reaction to these gigantic oil profits? There‘s nothing wrong with profits, but at the same time, $4 billion of our money going to them, how is it in any way justifiable?

REP. PETER DEFAZIO (D), OREGON: Well, it‘s extraordinary manipulation, essentially extortion. Their volume is only up 10 percent, but their profits are up 69 percent.

Now, how does that work? Did they become incredibly more efficient?


They are hand in glove with the OPEC people, with the market speculators, who are driving up prices unnecessarily over this panic about, well, what about Libya? What about the three percent of oil that they produce? Which OPEC is, of course, replacing.

And Exxon Mobil says, well, we don‘t set prices. They‘re set in the world market. And, on the other hand, they say, but if we had more domestic drilling, prices would be lower. Well, wait a minute. Prices are set in the world market, and if we added a little bit here in the U.S., the world market would change? No.

So, basically, they are kind of boxed in here. And I believe that this is—they‘re profiting in numerous ways here.

But all the way up their integrated supply chain, they are saying, well, our refineries are doing better, our distribution is doing better. And we‘re only making a little bit of money at the gas pump. Yes, because they are taking huge profits before the gas gets to the pump.

UYGUR: Well, Secretary Reich, you know, the Republican philosophy is, if we help the giant corporations, eventually it will trickle down to you. But Exxon‘s profits went up 69 percent and the GDP climbed only 1.8 percent. That‘s very low.

Is it possible that, actually, these big oil company‘s profits and the high gas prices are actually dragging the economy down?

ROBERT REICH, FMR. LABOR SECRETARY: Yes, they are dragging the economy down, Cenk, because, obviously, when Americans are paying almost $4 a gallon for gas, that means less money in their pockets to buy everything else that is produced in the United States by American workers. That means more layoffs. That means a slowing economy.

So it‘s very difficult for the oil companies to argue, as they have tried to argue even today, that the high prices and the high profits are justified and responsive to a growing economy, when in fact they are slowing the economy.

UYGUR: Well, let me stay with you for a second, Secretary Reich, because Mitch McConnell and the other Republicans say, hey, if we do more drilling, at least that will bring down the price of gas.

Is there any truth to that?

REICH: Absolutely not. First of all, it is a world market. That is, if we were to drill and create even 300 billion more barrels of oil, which is kind of the maximum anybody expects we could possibly get, that would bring down gas prices only a tiny bit because it goes all over the world. I mean, it replenishes gas and oil all over the world.

But, secondly, Cenk, it takes a very long time for oil, even more oil, to find its way through refiners and to gas stations, which means that it would be a year or more before gas prices would actually decline.

And finally, there‘s no evidence at all that additional drilling in the United States or on the Continental Shelf is actually going to bring down gas prices. It‘s actually—given the monumental profits that oil companies are now making, there‘s no reason that those oil companies have to actually use those additional leases.

In fact, they have been sitting on leases. They haven‘t even been using the leases they now have. They just want to show higher balance sheets because they can show that they have more land on which they could potentially drill.

UYGUR: Now, Congressman DeFazio, I want to show you some of the numbers here.

Oil company PAC donations in just the last three months is $285,000.

Of course, John Boehner has gotten a nice chunk of that. He got $15,000. Other Republicans like Senator Barrasso, Representative McCarthy, Representative Upton, Representative McKinley, they are all cashing in.

When you look at the overall numbers, oil and gas contributions to John Boehner in his career, for example, is over $346,000. So when I say they pay his checks, that‘s exactly what I‘m talking about. And overall, in 2010, the oil and gas companies spent over $146 million in lobbying.

So, do these Republicans care about the policy whether the gas prices go up, they go down, the drilling makes a difference, it doesn‘t make a difference, or is it simply that they are bought by the oil companies and that‘s why they do their bidding?

DEFAZIO: Well, there‘s certainly a lot of evidence that there‘s undue influence that comes with those contributions from the oil industry. We aren‘t doing things that make sense for the American people.

Remember, the other big factor here is market speculation. Part of the financial reform was to limit position limits in trading of oil by speculators, financial speculators. That hasn‘t happened yet because of pressure by the Republicans—they, in fact, want to undo that reform—pressure from Wall Street and, yes, the oil companies.

Guess what? Exxon Mobil trades, too. And they make a pile of money because they know where the prices are going.

So, we have both speculation, market manipulation, and undo influence on the policymakers. It‘s a very bad combination for consumers.

Consumers have got to get mad about this and push back and demand. I mean, insult to injury.

Give them a subsidy? Come on. That‘s a no-brainer. If we can‘t do away with that by next Tuesday at midnight, when we go back in session, I think then the Republicans are just silly.

UYGUR: Deep trouble. Yes.

Look, people are starting to get really mad about it. Giving away our money is crazy.

Now, Secretary Reich, let‘s talk about that speculation, because Congressman DeFazio brings up a good point here.

We know the drilling, at most, creates a three-cent difference, as you pointed out. That might or might not happen within a year from today. But some are saying the speculation costs are as much as 70 cents a gallon.

Is that really true? Is that part of what‘s driving up the gas prices here?

REICH: Well, you know, the thing is, Cenk, we don‘t know very much. A lot of this market is shrouded in secrecy. We don‘t know how much of it is speculation. That‘s why we do need to know more.

Undoubtedly, when you see prices going up like this, when you see prices responding to potentially the tumult in the Middle East, other people‘s and other buyers‘ expectations that prices are going to go up, you have every reason to believe that speculation is going on. And that‘s why, as the congressman says, Republicans have been pushing back on financial reform. What we need to do is make sure that this kind of speculation is prohibited and fully transparent.

UYGUR: And I want the audience to understand one of the reasons that they don‘t want to end this speculation, which seems crazy to you and I, is because, again, they get paid by the bankers. They get paid to protect the banks and to protect the oil companies, who are both getting incredibly rich off of those high gas prices that they‘re killing you and me. Right.

So, Congressman DeFazio, the last question goes to you in terms of what are we going to do about it?

Now, is it possible that the Democrats can say, hey, listen, we‘re not going to get any budget deal, we‘re not going to budge on your spending cuts, et cetera, et cetera, until at the very least, you take away this $4 billion a year in oil subsidies that is just nothing but corporate welfare?

DEFAZIO: Well, that‘s a minimal starting point. That should be a no-brainer from what—the Republicans running from this issue now.

We shouldn‘t even have to ask for that. We should ask for something a little bigger.

Maybe we have a speculator tax to try and rein in speculation, and we also move the Commodity Futures Trading Commission—move their proposed limits forward now, and we could do it legislatively. We have got to stop this speculating on the market that is adding so much to the price that is dragging down our economy, as the secretary pointed out.

If the Republicans, if they really care about the American people and about our consumers, and about the future of our economy, they will join with Democrats here. We‘re certainly going to offer those sorts of things when we come back. And I‘ve been offering them for a number of years.

Remember, the Enron loophole is not yet closed. Ken Lay is dead, Enron is bankrupt. But we‘re still allowing the speculation that Enron muscled through during the Bush years to go on.

UYGUR: And you know that question to Congressman Ryan came from a conservative area in his district. So I think a lot of the voters are getting it.

And if you‘re a conservative, why don‘t you ask your Republican congressman, why do you continue to protect the banks and the oil companies? It‘s a great question. And I love that they are doing that in the town halls.

But tonight, Congressman Peter DeFazio and Secretary Robert Reich, thank you both for joining us. Really appreciate it.

DEFAZIO: Thanks.

REICH: Thanks, Cenk.

UYGUR: All right.

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business. Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission. In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.
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