Today, top executives of Big Oil companies faced the Senate Finance Committee for their annual grilling.
The Senate panel is looking at the possibility of cutting about $4 billion a year in tax subsidies from these specific companies. The Democratic position is that in a time of $100-a-barrel oil prices and $4-a-gallon gasoline prices, the major oil companies are making bumper profits (the five companies pocketed $36 billion in profit in the first quarter of 2011), and do not need to be subsidized by the American taxpayer.
The petroleum industry position, backed by Republican senators, is that oil companies’ profits are a natural product of a free market (oil companies make profits when oil prices are high and lose money when oil process are low), that it is taxed at a higher rate than other industries, and that the oil industry should not be singled out for government intervention.
This is an old argument and unlikely to be resolved in this session. While Democratic Senator Robert Menendez is crafting a bill to repeal the tax breaks for the five largest oil companies in the US, it is unlikely to go anywhere. Republicans have the votes to block it in the Senate, including those of some Democrat senators representing oil states.
For consumers, this argument is of little value. They want relief from high gasoline prices, which will have to come from the market (through lower oil prices and a higher supply of gasoline products).