Big Oil Subsidies Dodge the Ax
Tuesday, June 10, 2008 at 7:12 pm
Senate Republicans today killed legislation to eliminate billions of dollars in federal subsidies for the oil and gas industry and invest the money instead in renewable fuels. The bill would also have applied a windfall-profit tax to large oil companies that fail to invest in clean energy technologies.
The count was 51 to 43 against moving to debate the legislation — nine votes short of that needed to trump the GOP filibuster. Six Republicans joined the Democratic majority in supporting the bill, including Sens. Norm Coleman (Minn.), Susan Collins (Maine) and Gordon Smith (Ore.), all of whom face tough reelection bids in November.
The vote showcases the partisan disagreement over energy policy as lawmakers scramble to rein in the price of gasoline, which topped $4 per gallon this weekend. Democrats are pushing to eliminate the oil subsidies, in effect demanding that the industry pony up in the name of helping consumers. In launching their criticisms, Democrats cite national-security concerns and record-high oil industry profits. Republicans, on the other hand, claim that protecting the oil industry is the key to lower gas costs. Cutting the subsidies, they say, constitutes a new tax on industry — a cost that would only be passed along to consumers, exacerbating the problem. GOP leaders have rallied behind the White House in calling to unlock more domestic oil reserves, like those in the Arctic National Wildlife Refuge, currently protected from drilling.
The stalemate leaves plenty of room for political posturing in the lead-up to November’s elections, with each side blaming the other for stalling efforts to lower the cost of fuel. If the 2006 elections were a referendum on the war in Iraq, this year’s contests are evolving as a blame game over prices at the pump.
Just before Tuesday’s vote, Senate Majority Leader Harry Reid (D-Nev.), a lead sponsor of the proposal, accused the Bush administration of catering blindly to the oil industry.
“They never asked the oil executives to build new refineries or to invest in clean, renewable alternative fuels,” Reid said on the chamber floor. “They apparently failed to consider the national-security implications of our addiction to oil, and never asked the oil companies to invest in clean energy we can grow right here in America.”
Environmentalists were quick to chime in, blasting Republicans for prioritizing industry at the expense of cleaner energy solutions.
“Make no mistake,” Carl Pope, executive director of the Sierra Club, said in a statement, “this minority chose protecting big oil instead of promoting affordable clean energy and protecting their constituents from the crippling energy prices that are wrecking our economy.”
Under the bill, roughly $17 billion in tax breaks to the oil industry would be transferred to promote wind, solar and other renewable energies over the next 10 years. It would also take steps to punish price gouging by retailers and suspend purchases of crude oil by the Strategic Petroleum Reserve through the end of the year. In addition, large oil companies that don’t invest in new refineries and clean technologies would get hit with a 25 percent windfall profit tax.
But Republicans wonder how a new tax for the oil companies could reduce gas costs for consumers. Senate Minority Leader Mitch McConnell (R-Ky.) on Tuesday called the proposal a political “gimmick.”
“Democrats will claim that this bill would bring gas prices down,” McConnell said in a statement. “But in doing so they are counting on Americans to forget a basic law of economics: that raising taxes on those who produce something leads to an increase in the price of the products they sell. This was true in Adam Smith’s pin factory. It’s true for energy companies today. More taxes means higher prices.”
Earlier in the day, echoing McConnell’s concerns, the White House said President George W. Bush would veto the bill if it reached his desk.
The comments come just days after the price of oil surged $11 per barrel to more than $139 — the largest ever single-day jump. The trend has prompted Saudi Arabian leaders to announce a summit among oil-producing nations to address the skyrocketing costs of fuel.
“There is no justification for the current rise in prices,” Saudi Arabia’s Information and Culture Minister Iyad Madanisaid said Monday, according to The Associated Press.
Also on Tuesday, Senate Republicans blocked debate on a separate Democratic bill to extend roughly $50 billion in expiring renewable energy tax credits to businesses and consumers. The vote, largely along party lines, was 50 to 44 — 10 shy of the 60 needed to defeat a filibuster. Republicans objected to several tax-code changes in the bill, including one preventing hedge fund managers from deferring taxes paid on income held in offshore tax havens.
The vote brought another round of biting accusations over which party has the concerns of voters in mind.
“When gas is four dollars a gallon, it’s unconscionable to refuse to help this country turn toward new sources of energy,” Senate Finance Committee Chair Max Baucus (D-Mont.), who sponsored the bill, said in a statement. “I don’t know how bad it has to get before some senators vote to fix our energy policy.”
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