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While debating a bill that would repeal $2 billion in tax subsidies for Big Oil, S. 2204, United States Senators came to the floor to state their case. Unfortunately, those defending Big Oil’s perks decided to use well-worn myths and misdirection. It is important for American consumers to know what is true and what is more Big Oil spin. Here are 4 commonly mentioned myths that Senators used to defend the indefensible Big Oil tax subsidies:
Myth: “Doing away with these [taxpayer subsidies] is nothing more than a tax hike that will raise gas prices.” –Senator Jim Inhofe (R-OK)
Fact: A similar refrain was echoed by Sens. Hoeven and Vitter, but it is not true. According to the Congressional Research Service “the the price of oil is determined on the world market and tends not to be sensitive to small cost variations experience in regional production areas.” With oil selling at over $100 a barrel, the tax subsidies have lost their incentivizing purpose and are no longer relevant to gas prices and do not affect crude oil prices at all. Repealing generous tax subsidies will not have an impact on gas prices.
Myth: An increase in domestic oil production will bring down gas prices. –Senator John Hoeven (R-ND)
Fact: This favorite myth was just de-bunked by the Associated Press. Crude oil prices are set on a world market. The United States only has 2% of the world’s oil. Domestic production does not make a difference in the price set by OPEC. If increased production could bring down gas prices, then they would already be decreasing because we are producing more oil than at any point in the last 8 years. In spite of this fact, prices continue to spike and volatility reins. As a result, we can conclude that domestic production will not affect prices at the pump.
Myth: We cannot repeal the tax subsidies because “the tax subsidies enjoyed by the Big 5 oil companies are put back into production.” –Senator Dan Coats (R-IN)
Fact: The Big 5 oil companies make $137 billion in annual profits, while collecting $2 billion in yearly tax subsidies. Even with the small amount of subsidies in relation to their profits, they do not use them to increase production. As explained by the Center for American Progress last year, much of this money is used to increase their companies’ stock price through stock buybacks. While this is great for Big Oil and their shareholders, it does nothing for American consumers and the high prices at the pump.
Myth: President Obama’s energy policy is to keep domestic energy off limits. - Senator Dan Coats (R-IN)
Fact: Oil and gas production in the United States is at an 8 year high. If President Obama was working to keep our domestic energy off limits, he is doing a terrible job. While our production on shore is skyrocketing, prices at the pump are doing the same. Meanwhile the oil and gas companies are hoarding leases and permits on our public lands, while keeping them idle. Out of 38 million public acres the oil and gas companies hold, two thirds of them are idle. 7,000 permits have been issued that are not being used. Even with all of the idle land, the United States has more active drilling rigs than the rest of the world combined. The United States is producing fossil fuels at staggering rates, but this is not enough for the oil industry and their Capitol Hill allies.
Big Oil has held some of these tax subsidies for nearly a century, long before they were making more than $100 billion in yearly profits. With the United States facing tough budget choices, this is an easy one. Big Oil does not need billions of dollars in taxpayer handouts and their allies are resorting to myths to try and stand up for them. It’s time to end the corporate welfare for Big Oil.