Getting drilled: ending Federal giveaways to big oil

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SEN. CHUCK SCHUMER (ND NEW YORK: When the average motorist pulls up at that pump, they‘re hit with a double whammy—the high price of gasoline, and then some of their tax dollars are going to subsidize Exxon Mobil.

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SEN. DEBBIE STABENOW (D), MICHIGAN: We pay for the privilege of their gouging us.

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SEN. ROBERT MENENDEZ (D), NEW JERSEY: It‘s time for the big five oil companies to give up these subsidies and allow their companies to pay a fair share towards reducing the deficit.

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UYGUR: It‘s on. Look at that.

Senate Democrats are hitting back at big oil and the Republicans who support them unconditionally. The Democrats sent a letter to the CEOs of the big five oil companies, and they‘re urging them to admit that they don‘t need those taxpayer subsidies when they appear before the Senate Finance Committee tomorrow.

Now, remember, they take at least $4 billion in subsidies every single year. What the Democrats are proposing is, hey, over the next 10 years, let‘s at least take back $21 billion of those subsidies. That cuts our deficit, that helps to balance our budget, and they clearly don‘t need them. Let me show you.

Exxon Mobil, Shell, ConocoPhillips, BP and Chevron made $32 billion in profits just in the first quarter. So how do they maintain these huge subsidies anyway? Well, that‘s because they have big backers in the Republican Party. Look at this.

House members who voted to continue oil subsidies received five times more money in 2010 from oil and gas. Of course.

They received more than $8.7 million in campaign contributions from oil and gas interests in that 2010 election. So now the GOP says that taking away subsidies would raise gas prices.

Now, I‘ve got to tell you, that is absolute economic nonsense. Under that theory, the only way that gas prices would rise is if the oil companies produced less oil because they thought that they weren‘t making enough money. Well, you know, our taxes are higher, we‘re not making enough, so we‘re not going to produce as much oil, and then prices go up.

But that‘s a laughable proposition. They‘re making money hand over fist.

You know that the prices have tripled since the last time we passed one of those subsidies? Tripled.

So, of course they‘re going to continue producing as much oil as
possible, and it isn‘t going to affect gas prices at all. But the thing is, the Republicans already know that. They‘re just looking for any excuse to justify selling out to their donors, which are, of course, the huge oil companies.

All right. Now let me bring somebody in here to have a discussion with.

The man you just saw in that clip was Senator Robert Menendez. He‘s one of the lawmakers who sent that letter to the big oil CEOs, and he‘s going to grill them tomorrow.

Senator Menendez, great to have you here.

MENENDEZ: Good to be with you, Cenk.

UYGUR: All right. Now, you‘re going to bring in the oil executives. My guess is they‘re going to say that they still absolutely need those subsidies. In fact, ConocoPhillips said that it was un-American to challenge those subsidies.

How do you respond to that?

MENENDEZ: Well, number one, I hope ConocoPhillips will apologize tomorrow to suggest that simply asking them to be part of meeting the nation‘s deficit challenge, as we‘re asking middle class, working families, families on medium income in this country and make $50,000 a year, that we say to them they should be part of meeting the nation‘s deficit challenge, but we‘re not willing to say to the big five oil companies who will make projected $125 billion this year that they should give up $2 billion this year in oil subsidies and do so for the next 10 years? That‘s pretty ridiculous.

And so to say that that‘s un-American is unacceptable, number one.

And number two is some of them have in the past suggested—or some of their predecessors have suggested that when oil is at the price it is, it‘s certainly not necessary to have these subsidies.

So the bottom line is, I don‘t know how the big five are going to do anything to justify the position that the American taxpayer should continue to have what in essence is corporate welfare.

UYGUR: Now, I‘m going to play you a clip of Fox News anchors talking about this, because I want to show people the nonsense and then come back and talk about why it makes no sense.

Let‘s watch it first.

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UNIDENTIFIED MALE: If you raise the taxes on gasoline and oil, the price of gasoline and oil isn‘t going to go down. The price of gasoline and oil is going to go up.

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(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: This White House does not want to lower prices, and they‘re willing to go after the oil companies, which is going to only make the price go up.

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UYGUR: Now, there aren‘t any economists who agree with that. They say that it‘s, of course, all about supply and demand, and that the oil companies will continue to supply the oil, because they‘re making incredible profits at it.

So how do you argue with people who don‘t argue based on facts?

You know what it is? They‘re taking $21.8 million—they did in 2010, the Republicans did—from oil and gas companies. So they‘ll make up anything. So how do you argue with these guys when they don‘t even believe the things that they‘re saying themselves?

MENENDEZ: Well, Cenk, one of the things about truth is that no matter how much you crush it, it springs back up. And it‘s pretty undeniable.

The reality is, is that to suggest that gas prices are going to go up because we‘re going to take $2 billion away from the big five only, the big five oil companies who will makes $125 billion this year in profits, and that somehow should dictate more rising gas prices is ridiculous. And the average American fully understands that.

Secondly, it‘s very well established that the fluctuations in the marketplace, speculation, you know, the price—the strength of the dollar, disruptions in market supply, that can affect gas prices more—probably than anything we‘re going to do in taking away a small amount of the corporate subsidies that they‘re getting.

And lastly, when it‘s 30-some-odd dollars a barrel to produce oil, and a lot less for the big five—they‘re even more efficient at it—and you‘re selling oil at $100-something a barrel, you know that there‘s plenty of room already. That‘s why they‘re making these record profits.

They don‘t need to gouge the American taxpayer more. They‘re already paying at the pump. And it‘s an insult to have them not only pay at the pump, but then also give them a tax subsidy out of those taxpayers‘ pockets.

UYGUR: All right. The final question for you, Senator Menendez, is on how do you get this done? Right?

Because to me it seems like you guys should say under no circumstances will we have any budget cutting at all going forward until you take away these subsidies. That‘s it, we‘re not—you know, they love to declare things off the table all the time, right? Until you put this on the table, we‘re not having a conversation.

Is that actually possible in Washington?

MENENDEZ: Well, I certainly believe that since all of the $21 billion that we‘ll save by taking away these subsidies to big oil will go to the deficit—that‘s what we proposed—that in any extension of the debt relief—of the debt ceiling—that this has to be an essential element.

They‘re going to come and say they want certain things. I think this should clearly be one of our counters. And it seems to me that it‘s doable.

You know, even some Republicans—Speaker Boehner, in the past, has said this should be eliminated. Ryan, the budget chair, has said that in the House, several of my Republican colleagues here in the Senate.

Well, it‘s time to show us that you‘re willing to put your vote where your comments are.

UYGUR: And you know who else has said that? Seventy-four percent of the American people. So this should be an easy win for Democrats if you guys insist on it. That‘s my sense of it. We‘ll see if that comes to fruition.

Senator Robert Menendez, thank you for joining us this evening. We really appreciate it.

MENENDEZ: Great to be with you.

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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