The familiar dog and pony show of calling oil company executives to Washington to testify before a pandering congress begins today:
WASHINGTON – Big Oil is once again being called on the carpet. Senior executives of the five largest U.S. oil companies were to appear before a congressional committee Tuesday where they were likely to find frustrated lawmakers in no mood for small talk.
Oh, that sounds serious. I wonder if those lawmakers have some solutions in mind? Let’s see, the last two times this happened – following Hurricane Katrina (oil prices were at $60) and then again in May 2006 (oil prices had risen to $75) – what exactly was accomplished? Well, a lot of fuel was wasted by flying all of these guys to Washington at taxpayer expense. Time was wasted. And oil prices have risen to over $100. Sooner or later congress is going to figure out that prices are rising for reasons other than a Big Oil conspiracy.
“These companies are defending billions of federal subsidies … while reaping over a hundred billion dollars in profits in just the last year alone,” complained Rep. Edward Markey, D-Mass., in previewing the hearing.
The lawmakers were scheduled to hear from top executives of Exxon Mobil Corp., Shell Oil Co., BP America Inc., Chevron Corp. and ConocoPhillips, which together earned about $123 billion last year because of soaring oil and gasoline prices.
Markey, chairman of the Select Committee on Energy Independence and Global Warming, said he wants to know why, with such profits, the oil industry is steadfastly fighting to keep $18 billion in tax breaks, stretched over 10 years.
Leave it to demagogue Markey to characterize a tax deduction as a subsidy. When you pay your taxes, but get deductions for your mortgage interest, for instance, do you consider this a subsidy? You are paying taxes, and get a break equivalent to a small fraction of your tax bill, but that’s a subsidy. It’s the same concept. And contrary to popular belief that this is an “oil industry tax break”, it is actually a tax deduction that was made available to all manufacturers. These manufacturers include industries with much higher profit margins than the oil industry sees.
What Markey and the panderers want to do is to insert language that says something like “Tax deduction for manufacturers – unless you happen to be an oil company.” They wish to single out one industry for punishment – and I think their reasons are clear: This will be popular with a public whose energy IQ is in the single digits.
I don’t see this as all that different from the moves Chavez has made. Rules were put in place. Projects in the oil industry take many years to complete. Projects were begun based on the rules that were in place, and now there is the threat of a rule change that would impact upon project economics. That’s what Chavez did: He changed the rules in the middle of a game that takes years to complete.
What kind of message does it send when we change our energy policy every couple of years? And I don’t say that only with respect to oil companies. Wind and solar companies see credits expire and then they are renewed. The credit for hybrids expires, and then is renewed on a whim. Long-range planning becomes very difficult if you have frequent, unanticipated rule changes. The only constant seems to be that we will subsidize ethanol consistently, as we have been doing now for almost 30 years. That is one tax credit that has never lapsed, and in my opinion will be in place for the next 30 years.