YES: Congress protects tax breaks as oil company profits soar.
By Michael J. Wilson
In 1981, I was a door-to-door canvasser for the Citizen Labor Energy Coalition.
It was a memorable year for other reasons, too. Charles and Diana were wed. MTV was born. President Reagan survived an assassination attempt, Egyptian President Anwar Sadat did not. Sandra Day O’Connor became the first woman on the Supreme Court.
Ah, those were the days. I also remember being appalled as gas prices doubled from 1979 to $1.35 a gallon. This was just a few years after the first oil crisis forced Americans nationwide into lengthy gas lines and smaller, more fuel-efficient cars.
It was clear the country needed an energy policy that didn’t depend on deregulating the oil industry or throwing more tax breaks at them, hoping it would lead to greater fuel efficiency and less reliance on foreign oil.
Fast forward 30 years to 2011; gas prices tickling $4 a gallon, a nation growing increasingly reliant on foreign oil — and the U.S. military ever more entrenched in the oil-rich Mideast.
Here we are and still in need of an energy policy. And who is to blame for the lack of progress? Is it President Barack Obama, the oil companies, or members of Congress? The answer is no, yes and yes.
A recent CNN poll showed 61 percent of the public place a “great deal of blame” on oil companies versus 25 percent who blame President Obama.
It’s easy to see why the companies get blamed. The “Big Five” oil companies — ExxonMobil, Chevron, Royal Dutch Shell, ConocoPhillips and BP — reported a combined first quarter profit of $62.7 billion. Since 2000, their combined profits approach $1 trillion.
That’s right, as government funds are being slashed for infant formula for low-income mothers, while teachers, firefighters and police are being laid off by the boatload — Big Oil’s $4 billion in tax breaks remains secure.
Obama has proposed ending these subsidies. Congressional Republicans — the party of low taxes and free markets — however, continue to fight to retain every oil industry tax break, refusing to even consider or comprehend their hypocrisy.
For example, Rep. Joe Barton, R-Texas, who infamously apologized to BP after it devastated the Gulf of Mexico, defended the subsidies as incentives needed to save companies like ExxonMobil from going bust.
Since 1998, the oil and gas industry spent more than $1 billion on lobbying, according to OpenSecrets.org. Poor Rep. Barton only got $161,870 in contributions in 2010.
It’s clear to see why our 1981 energy policy can’t get changed. The companies like it, their protectors in Congress like it, even some presidents liked it.
While President Obama has tried to help shift to green energy and rely less on imported oil, he followed an oil ticket to the White House. In 2000 and 2004, the Republicans won with oilmen George W. Bush and Dick Cheney at both ends of the presidential ticket.
Change is hard. But if $4 a gallon gas doesn’t do it, maybe $5 a gallon might. Don’t think it’s not coming. One thing is for sure: We are never going to see 1981’s $1.35 again.
In “The Path to Power,” historian Robert Caro described the political ambitions of Lyndon Johnson in 1940, then a 32-year-old congressman. Johnson, born dirt poor and still struggling, surprisingly turned down a lobbyist’s offer of a lucrative interest in an oil business. “It would kill me politically,” Johnson explained.
It was clear that Rep. Johnson had unlimited ambition and high hopes for his political future. It was also clear that he believed that no oilman could be elected president. Ah, those were the days.
Michael J. Wilson is the national director of Americans for Democratic Action in Washington, D.C.
NO: World events beyond our control drive pump prices.
By Mark J. Perry
Every time the price of gasoline shoots up, the U.S. finds itself in the same plight, yet we never learn from it.
Before we make the mistake of blaming oil companies for high prices, we should consider who the real culprits are.
If ever there was a time for an honest look at oil and gasoline prices, it’s now. And what that inquiry concludes is that the American oil industry is not the instigator of higher prices.
The spike in gasoline prices is the latest reminder of the cost to America of not having a comprehensive energy policy. By relying so heavily on imported oil, we are held hostage to events around the world.
Part of what lies behind soaring prices is turmoil in North Africa and the Middle East which has been spreading. After demonstrators took to the streets in Egypt, protests broke out in Tunisia, Kuwait, Yemen and Libya. Oil-rich Libya sends only a small fraction of its oil to the United States, but because oil is a world commodity, Americans are not immune to the shock waves. Are other oil-producing countries like Bahrain and Oman next?
This uncertainty about tomorrow is reflected in oil prices today. Investors are worried about the situation because no one knows where the turmoil will end. The risk is geopolitical instability in the Persian Gulf that has widespread effects.
Another problem: oil supplies are getting harder to replace once they’ve been consumed — and the demand for oil keeps growing, particularly in China, India and Brazil. In 2009, the last year for which figures are available, the world consumed 11 percent more oil than a decade earlier.
Oil imports now cost Americans $1 million a minute. Crude oil prices, which are set on the world market based on market forces, fluctuate substantially and unpredictably.
It’s time for the administration to realize the urgency and to set the country on a clear strategy of boosting oil production at home. President Obama’s recently announced steps to lease some new areas, while worthwhile, fall short of what needs to be done. Congress should lift the moratorium on oil development in the Atlantic, Pacific and eastern Gulf of Mexico now.
This would make it more difficult for foreign countries to cut production to force up prices. The potentially unreliable countries of North Africa and the Persian Gulf, Venezuela and Nigeria supply a combined total of 5 million barrels a day — about a quarter of U.S. consumption. That is the amount we ought to replace with an increase in our own domestic production.
Fortunately, geologists say there is still plenty of oil in the ground and beneath the sea in the United States. According to the federal government, an estimated 67 percent of undiscovered oil resources are located on federal lands, a good part of which are off-limits to exploration and drilling.
But Obama and many Democrats in Congress have other plans, which directly contradict all their talk about achieving energy independence. The administration’s moratorium on exploratory drilling in new offshore areas has locked away billions of barrels of oil. Oil production in Alaska, which has been in decline for decades, could be doubled by opening up the Arctic National Wildlife Refuge and Arctic waters that are currently closed to drilling.
Combine these restrictions on drilling with instability in the Mideast and it’s no wonder consumers are gritting their teeth at the price of gas. But we shouldn’t blame oil companies for soaring prices, when they have nothing to do with the restrictions on domestic energy sources or the geopolitical events elsewhere that are the real culprits for higher prices.
Mark J. Perry is a professor of finance and business economics in the School of Management at University of Michigan-Flint and a visiting scholar at the American Enterprise Institute in Washington.
