Today, President Obama called on Congress to end “subsidies” for the major oil producers. Speaking in the Rose Garden, the president said:
Right now, the biggest oil companies are raking in record profits –- profits that go up every time folks pull up into a gas station. But on top of these record profits, oil companies are also getting billions a year — billions a year in taxpayer subsidies -– a subsidy that they’ve enjoyed year after year for the last century.
Think about that. It’s like hitting the American people twice. You’re already paying a premium at the pump right now. And on top of that, Congress, up until this point, has thought it was a good idea to send billions of dollars more in tax dollars to the oil industry.
It’s not as if these companies can’t stand on their own. Last year, the three biggest U.S. oil companies took home more than $80 billion in profits. Exxon pocketed nearly $4.7 million every hour. And when the price of oil goes up, prices at the pump go up, and so do these companies’ profits. In fact, one analysis shows that every time gas goes up by a penny, these companies usually pocket another $200 million in quarterly profits. Meanwhile, these companies pay a lower tax rate than most other companies on their investments, partly because we’re giving them billions in tax giveaways every year.
None of this is new. Like one of those dolls in an old cuckoo clock, President Obama periodically appears to smear someone somewhere in America who happens to be engaging in business and making a profit. Today’s speech was recycled from the one he delivered on March 1, for instance. Congress will ignore him, and he’ll be back in a few weeks to say the same thing again.
As for the “subsidies” he mentions, they are actually tax breaks, and they’re not unique to the oil companies. They’re the same tax breaks that other American corporations enjoy. The president is only targeting oil companies because they’re a convenient boogeyman, and because he’s getting hammered in the polls over his policies and the skyrocketing price of gas. If he gets his way, the oil companies will see their tax bills raised. They will pass that increase on to consumers — you. So Obama here is proposing to raise the price at the pump, not lower it.
The president used part of his camera time to inveigh against oil company profits, insisting that for every penny of price increase at the pump, oil companies make $200 million more money each quarter. But as usual, the devil is in the details. Is that per company, or spread out across the entire oil production industry? Based on logic and the way he worded it, Obama surely meant the latter, so the per company profit number is far smaller than he insinuated. This is a global industry he is talking about.
President Obama also failed to note, at all, the role that governments play in the price of gas. Setting his anti-fossil fuel policies aside, the fact is that the federal and state governments rake in far more profit from each gallon of gasoline purchased than any of the oil companies do. According to the American Petroleum Institute — a group that Obama hopes to get you hissing at — here are the state level gas taxes per gallon sold.
As usual, when it comes to taxes, California loses — it has the second highest state gas tax. In fact, a general rule of thumb is that the bluer the state, the higher the gas tax. State governments don’t find the oil, they don’t get the oil out of the ground, they don’t refine it or transport it or set up the pumps. But they profit from gas, mightily.
The president inveighed against the oil companies for “hitting the American people twice.” He should look, then, at his own government. Included in the chart above are the federal gas taxes: The federal government piles on 18.4 cents per gallon (24.4 cents per gallon on diesel).
You may be paying local gas taxes as well. The president has never inveighed against any of these taxes, or the profits that governments haul in minute by minute, hour by hour, day by day.
Suppose the president gets his way and Congress singles out the oil industry and does away with its tax breaks. Where will the money he hopes to raise go? Based on past experience, it will go to one of the most heavily subsidized industries in existence: so-called “green” or “clean” energy. In fact, he said as much:
Instead of taxpayer giveaways to an industry that’s never been more profitable, we should be using that money to double-down on investments in clean energy technologies that have never been more promising — investments in wind power and solar power and biofuels; investments in fuel-efficient cars and trucks, and energy-efficient homes and buildings.
The president is just hoping to use one industry’s profits to prop up another industry that cannot stand on its own, and hit you twice with taxes while doubling down on failure. If you liked Solyndra, you’ll love what the president plans next.
None of what the president said today or plans to do will bring the pump price down by a penny. It’s expected to keep going up through the summer.
Note: I incorrectly broke out state and federal taxes in the map, but it includes local, state and federal taxes.
Update: The Senate has, as predicted, ignored the president’s call to raise taxes on the oil producers.