Oil industry advocates, a group that includes many Republicans in Congress, argue just the opposite. They say oil companies reinvest tax breaks into exploration and production, generating more tax dollars and increasing the supply of oil. They say eliminating tax breaks will raise the cost of doing business and lead to higher gas prices.
Executives from the five biggest oil companies were asked about these tax breaks at a Senate finance committee meeting yesterday. Democrats accused the oil companies of not paying their share to help the country emerge from economic hard times. Republicans derided the hearing as a dog-and-pony show staged to score political points.
The industry executives said eliminating the tax breaks would reduce investment in the United States. Exxon Mobil chief executive Rex Tillerson said the proposal “would discourage future investment in energy projects in the United States and therefore undercut job creation and economic growth.’’ He said it would do nothing to reduce gas prices.
The 41 oil and gas companies that break out their federal taxes said they paid Uncle Sam $5.7 billion in 2010, according to data compiled by Compustat. That’s more than any other industry. Exxon alone paid $1.3 billion. (The company’s total tax bill was $21.5 billion, but most of that was paid to foreign governments and states.)
But at a time when motorists are fuming about gas prices, Obama and Democrats see a huge political opportunity.
The price of oil is so high that removing these tax breaks would probably have little to no effect on domestic oil production. There are other factors that make the United States a highly attractive place to drill: It is politically stable, it has good roads and pipelines, and it is the world’s biggest energy consumer. And the industry would remain profitable even though eliminating the tax breaks would increase its US tax bill by nearly 70 percent.
