Based on the volume of Internet search results, you might think that oil companies, especially “BIg Oil,” are raking in billions of dollars in direct federal subsidies taxpayer payments every year. But you’d be wrong.
The reality is that oil companies, especially Big Oil (Exxon, BP, Shell, etc.), really don’t get any federal subsidies, if that term means “getting money to do something,” as Harold Hamm, CEO of Continential Resources reminded Congress in September when he testified that, “Some call the expensing of ordinary business expenses a “subsidy.” Now my recollection of what a subsidy means is when you are given money to do something. I guess when I drilled 17 dry holes in a row I missed that pay _ No one sent me a check.”
The ongoing debate in Washington over the possible repeal of what news media outlets commonly refer to as “subsidies” to the oil and gas industry has been an ongoing source of amusement and consternation to those who work in the industry for four years now
So how did all of this misinformation get started? It all began in 2009. Within days of being sworn in as the nation’s 44th President, Barack Obama ordered his staff to scour the tax code for any provision that was relevant to the oil and gas industry, and promptly began proposing them for repeal. The oil and gas industry has always been an easy target for political demagoguery, and that dynamic has played out repeatedly and consistently in this Administration.
Bottom line: Despite the Administration’s rhetoric that has been so widely repeated in the press, the tax treatments in question are not “subsidies” that are in any way outside of the mainstream of tax treatments commonly available to all U.S. industries. Rather than being mostly a benefit to “big oil”, the repeal of these and other oil and gas industry-related tax provisions would mainly impact smaller independent producers and royalty owners. Such repeal would serve no legitimate public policy purpose, other than to unfairly discriminate via the tax code against one of the nation’s most productive – albeit easily demonized – manufacturing industries.
But look at the breakdown. The single largest expenditure is just over $1 billion for the Strategic Petroleum Reserve, which is designed to protect the U.S. from oil shortages. The second largest category is just under $1 billion in tax exemptions for farm fuel. The justification for that tax exemption is that fuel taxes pay for roads, and the farm equipment that benefits from the tax exemption is technically not supposed to be using the roads. The third largest category? $570 million for the Low-Income Home Energy Assistance Program. (This program is classified as a petroleum subsidy because it artificially reduces the price of oil). Those three programs account for $2.5 billion a year in “oil subsidies.” So the next time you hear someone express outrage over oil company subsidies, you may want to ask them exactly which ones they are talking about.
In fact, look at the reaction from Democrats when President Obama tried to reduce funding for the program. Rep. Markey’s office said: “If these cuts are real, it would be a very disappointing development for millions of families still struggling through a harsh winter.” Sen. Jeanne Shaheen, D-N.H., noted her opposition: “The President’s reported proposal to drastically slash LIHEAP funds by more than half would have a severe impact on many of New Hampshire’s most vulnerable citizens and I strongly oppose it.” Sen. John Kerry, D-Mass., wrote a letter to President Obama that stated in part: “We simply cannot afford to cut LIHEAP funding during one of the most brutal winters in history. Families across Massachusetts, and the country, depend on these monies to heat their homes and survive the season.” Each one of these Democrats was defending a program that has been identified as a subsidy to Big Oil.
originally posted by: intrepid
reply to post by Wrabbit2000
There's a way around that IF the gov't was willing to do it. Tax and enforce the oil companies. They gouge, gouge them even further by taxation. Pass that back to the consumer. Yeah, like they would.
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The legislation would repeal a handful of tax breaks that the oil industry receives,