Crude reality. Challenging big oil on tax breaks.


SEN. JAY ROCKEFELLER (D-WV), FINANCE COMMITTEE: I think you`re out of touch, deeply, profoundly out of touch and deeply and profoundly committed to sharing nothing.

JOHN WATSON, CHEVRON CEO: I don`t think the American people want shared sacrifice. I think they want shared prosperity. And what we have to offer —



ROCKEFELLER: — lovely statement. But do you understand how out of touch that is? We don`t get to shared prosperity until we get to shared sacrifice.


MATTHEWS: Wow. Welcome back. That was a big exchange between Senator Jay Rockefeller of West Virginia and the CEO and chairman of Chevron, and it highlights the anger on display today in the Senate hearings. Oil company executives testified before the Senate Finance Committee today that they need big tax breaks. But in a year with record profits for oil companies that everybody knows about and rising gas prices everybody has to pay, their timing is pretty bad.

Joining me right now (INAUDIBLE) Finance Committee members, Senator Chuck Schumer of New York and Senator Debbie Stabenow of Michigan.

Senator Schumer, what`s going on with the oil companies? They seem to benefit — every time there`s any kind of kerfuffle in the Middle East, all oil goes up, even though a lot of it — most of it we get doesn`t come from over there. Why do oil prices always go up when anything happens in the Middle East, even though we don`t really rely on them for all the oil?

SEN. CHUCK SCHUMER (D-NY), FINANCE COMMITTEE: It`s called lack of competition. One of the worst moves that was made — and this was made by Democratic and Republican administrations alike — was to let them all merge. Imagine ExxonMobil, ChevronTexaco, BPAmoco. When you only have four or five big companies, they control it all and they don`t compete on price. So when the price of a barrel of oil goes up, the price at the gas pump goes up very fast. When the price of the barrel of oil goes down, it`s very sticky and goes down slowly because they don`t compete. Plain and simple.

And probably the best thing we could do is break them up, go back to the days when there were 10 or 15 world competitors, not just four or five. But that`s not going to happen.

MATTHEWS: Well, do you think there`s price leadership? do you think there`s price leadership? Do you think —

SCHUMER: Absolutely.

MATTHEWS: — there`s restraint of trade here?

SCHUMER: Absolutely.

MATTHEWS: Do you think a restraint of trade here?

SCHUMER: Absolutely.

MATTHEWS: Can you prove it? Can you prove it?


MATTHEWS: Can you prove collusion?

SCHUMER: I think, if it could be proven, they wouldn`t do it. It`s very hard to prove, because they don`t get in a room and conspire. Just one of them raises the price, and the next day, everyone else magically comes up with the same idea —


SCHUMER: — and raises the price the same amount. That`s not illegal, at least at this point.

MATTHEWS: No, it`s price leadership. It`s the — well, it`s industrialization organization.

Let`s take a look. Senator Stabenow, let`s take a look at this comment. Here`s a press release formally put out by Conoco, the big oil company. Now, this is amazingly destructive language.

“ConocoPhillips highlights solid results and raises concerns over un- American tax proposals at an annual meeting of shareholders.”

What`s that about, where they`re attacking anybody who questions their tax status as un-American?

SEN. DEBBIE STABENOW (D), MICHIGAN: Well, it`s really shocking, Chris.

And, at the hearing today, my good friend Chuck Schumer asked them specifically about that. Other colleagues as well asked them — asked him to apologize for that, the idea that it`s un-American to say that, with huge deficits that we have in this country, where we`re trying to figure out what needs to be cut in order to move forward that we wouldn`t look at, in some cases, 100-year-old tax breaks that have been given to the oil companies, back when a barrel of oil was $17?

Now it`s over $100. Highest profits of any corporation in the world, and then they have the audacity to not only sock it to us at the pump and hold us hostage because they — there is no competition, but then taxpayers have to pay on top of that.


STABENOW: So, when we look at how we`re going to bring down the deficit, what should go, this is definitely something that should go. And let me just add one other thing.

If folks want to go out and buy one of these great new American-made electric vehicles that we`re making in Detroit and in Michigan, as well as other vehicles, that`s a great way to get off of foreign oil.

MATTHEWS: Let`s take a look at Senator Schumer.

Here you are, sir, today taking on the chairman of ConocoPhillips. Let`s listen.


SCHUMER: Do you think anyone who advocates cutting these subsidies is un-American? Yes or no?


SCHUMER: Yes or no, sir. That one, we deserve a yes-or-no answer on. It was your release that said un-American.

Do you apologize for it?

Do any of you others consider it un-American to be against the subsidy that you`re for? If you do, raise your hand.

All right, thank you. I appreciate the other four of you not labeling those who are different from you un-American.


MATTHEWS: Well, do you make of this, Senator, that the Republicans in the Congress do defend these tax breaks? They obviously benefit from them for financial support.

But this is such an old argument. You probably grew up on it, like I did. The oil companies control the Senate. How does that happen? Why do they get the tax breaks from the Congress?

SCHUMER: Well, they got the tax breaks because of lobbyists and political muscle. But, you know, we`re in a different era in two ways.

One, oil is $100 a barrel, not $30, not $40, not $50. Their profits are greater than they have ever been. But, second, we have a huge deficit. And everyone is supposed to sacrifice. I mean, some of my colleagues on the other side of the aisle are saying, let`s cut cancer research, let`s cut loans to middle-class families to help them pay for tuition.

Do — does anyone, does anyone, except these five executives, think that those should be cut —


SCHUMER: — before we take back these tax breaks that they don`t need?


SCHUMER: I mean, it`s — it`s just — you know, I sat at that hearing and I said, the five of them are in their own little world. They probably go to something called the Petroleum Club in Houston and they just talk to one another. They don`t even understand the world that they`re in.

MATTHEWS: I think the Petroleum Club is in Tulsa, actually, but there is one.

SCHUMER: OK. Well, I — theoretically, yes.

MATTHEWS: And they all get together there. You`re right, though. It does exist.


SCHUMER: Whatever its name is.

MATTHEWS: It exists.


MATTHEWS: Let me ask you, Senator Stabenow, why do they —

SCHUMER: It`s not — it`s not called the shared sacrifice club, I assure you.

MATTHEWS: No, it`s not.

STABENOW: Right. Right.

MATTHEWS: No, I don`t think so.

Let me ask you, Senator Stabenow, about the question of power.


MATTHEWS: Do the auto companies that you have to represent geographically and economically, do they want this? Why do they want — why aren`t they fighting the oil companies?

It seems to me it`s — it`s almost a contradiction that they wouldn`t be opposed to — they would want cheaper gas, so they can get people to buy their cars and travel with them.

STABENOW: Well, they`re not advocating for these subsidies. They`re not advocating for higher prices. That`s for sure.

I mean, right now, they`re out rushing — I will be with GM tomorrow. They`re announcing 4,200 new jobs coming in Michigan related to the Chevy Volt, because it`s doing so well. Ford has announced 7,000 new jobs. Chrysler put a second shift in Detroit at the Jefferson plant for their great new vehicles.

I mean, we`re coming back because they`re making great new advanced- technology vehicles. And, you know, Chris, I think there`s one more really important thing. And that is the undertone today of the hearing was that somehow, if we took away these taxpayer subsidies, they were going to raise our prices again.


STABENOW: These billions of dollars in subsidies amount to about 1 percent — 1 percent of their profits. So, it`s absolutely ridiculous on the face of it.

And today, I said to them, does that mean that if we added more tax dollars, you would bring down our gas prices? I asked each of them, how much would it take for us to give you as taxpayers to bring down our prices? And none of them would — would answer that.

MATTHEWS: I think it`s time to play hardball with these guys.

Thank you very much, Chuck Schumer of New York, and Debbie Stabenow, the senator from Michigan.

STABENOW: Thank you.

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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2 Responses to Crude reality. Challenging big oil on tax breaks.

  1. Jim Meyers says:

    It is un-American to single out successful corporations who pay more in taxes than they make in profits, create jobs and provide healthcare to tens of thousands of Americans. These economically challenged Senators who are showboating no that if you raise a companies costs those costs will be passed on to the consumer. The entire tax code web was created by these people for the sole purposes of being re-elected. Now they are reaping what they sowed. They created the deficit!!!

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