High oil and gasoline prices exact a real economic toll on American families, as well as on travel-related businesses. They make everything more expensive, including driving and air travel. Families may travel fewer miles or take shorter trips to offset higher gasoline or other fuel prices. The high gasoline prices in the first quarter of 2012 suggest that the big five oil companies will reap even larger profits this year compared to their record-setting haul last year. Even though 2011 had a record average annual oil price, and these companies will also receive a major portion of the coming decade’s $40 billion in tax breaks for Big Oil, the big five companies produced 6 percent less oil worldwide than in 2010. Congress should eliminate these tax breaks and instead invest these scarce dollars in the development and commercialization of technologies that will reduce oil and gasoline use, including electric vehicles and public transportation.
Big Oil companies are also exporting gasoline and diesel fuels to other nations. Last year the United States exported an average of 2.9 million barrels per day of finished petroleum products. This was the first time since 1949 that the United States was a net exporter of refined petroleum products, and the Energy Information Administration reports that gasoline exports were more than 62 percent higher in 2011 compared to 2010. According to Congressional Research Service data, gasoline exports are 7 percent of gasoline consumption in 2012, up from 5 percent in 2010. In addition to exports, refinery closures are tightening gasoline supplies, particularly in the Northeast and West Coast. All of these occurrences—lower production by the big five, undeveloped leases, increased exports, and closing refineries—can contribute to higher gasoline prices.
In 2005 President George W. Bush supported the elimination of Big Oil tax provisions when he said, “I will tell you with $55 oil, we don’t need incentives to the oil and gas companies to explore. There are plenty of incentives. What we need is to put a strategy in place that will help this country over time become less dependent.” For instance, ending the tax breaks could provide revenue for the Electric Drive Vehicle Deployment Act, H. R. 1685, sponsored by Reps. Judy Biggert (R-IL) and Ed Markey (D-MA) would provide incentives for a “race to the top” for communities to deploy electric vehicles. House Budget Committee Chairman Paul Ryans (R-WI) proposed FY 2013 budget resolution takes the opposite approach. It would retain these Big Oil tax breaks while slashing billions of dollars of investments in alternative fuels and clean energy technologies that would serve as substitutes for oil and help protect middle-class families from volatile energy prices as well as create jobs.
The fundamental fact is that we rely too much on a single fuel whose price is set on a global market controlled by the Organization of the Petroleum Exporting Countries, or OPEC. But because oil prices are set by this world market, more domestic drilling cannot lower prices here. An Associated Press analysis found that there is no correlation between domestic oil production and gasoline prices. Expansion of drilling into previously protected areas risks a blowout that could harm the local tourism industry. For instance, Floridas coastal industries generate $175 billion in economic benefits and 2.2 million jobs annually. An oil blowout from new offshore drilling in the easten Gulf of Mexico would be especially damaging. Congress needs to enact an “all of the above” strategy that includes slashing oil dependence by supporting the doubling of vehicle fuel economy standards, investing in alternative fuels, rejuvenating our public transportation infrastructure, and paying for it by ending Big Oil tax breaks.
To speak to Daniel J. Weiss, please contact Christina DiPasquale at 202.481.8181
Information Source: PressZoom