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Petroleum industry

Senate Takes Up Bill to Repeal Tax Breaks for Big Oil Companies

Strategic Insights

— 2 min read

As the country grapples with soaring gas prices, the US Senate is set to take up a bill that would repeal about $2 billion a year in tax breaks for the five biggest oil companies. The evening vote is expected to fail, but Democrats hope to build their case to include the measure in a deficit-reduction package being negotiated by key lawmakers and the Obama administration. Lawmakers from both parties are demanding deficit reduction as part of a deal to increase the government's ability to borrow and avoid an unprecedented default on US Treasury bonds.

Key Takeaways:

  • The bill aims to repeal tax breaks worth about $2 billion a year for the five biggest oil companies: Shell Oil Co., ExxonMobil, ConocoPhillips, BP America, and Chevron Corp.
  • The tax breaks in question include a deduction available to US manufacturers across industries, a provision established in 1913 to encourage domestic drilling, and another that allows oil companies to reduce their American taxes by deducting royalties paid to foreign governments.
  • Democrats argue that the big oil companies wouldn't miss the tax breaks, given their combined profits of $36 billion during the first quarter.
  • Senate Republicans and some Democrats oppose the tax increases, noting that they would do nothing to lower gas prices.
  • The national average gas price is $3.94 a gallon for regular unleaded, up from $2.87 a gallon a year ago.
  • President Obama has called for eliminating tax breaks for all oil and gas companies every year since he took office in 2009, a proposal that would raise an estimated $44 billion over the next decade.
  • A GOP measure designed to increase offshore drilling is scheduled for a Senate vote on Wednesday, but it is not expected to pass.
  • Democrats have asked the Federal Trade Commission to investigate "potential price fixing of gasoline by U.S. refiners," sparking concerns about the influence of oil companies on gas prices.

Statistics:

  • The five oil companies logged profits totaling $36 billion during the first quarter.
  • The national average gas price is $3.94 a gallon for regular unleaded, up from $2.87 a gallon a year ago.
  • The proposal to eliminate tax breaks for all oil and gas companies would raise an estimated $44 billion over the next decade.
  • The bill being voted on Tuesday would raise about $21 billion over the same period, targeting only the five largest oil companies.

Sources:

  • "US Senators To Vote On Bill To Repeal Tax Breaks For Big Oil Companies"
  • "Gas Prices: Democrats, Republicans at Odds"
  • Congressional Research Service: "Taxation of Income from Domestic Production of Oil and Natural Gas"
  • AAA: "Gas Prices"

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