Plethora of problems at the pump; solutions harder to find

Published: Thursday, May 5 2011 12:00 a.m. MDT

With gas prices averaging $3.98 per gallon — but reaching as high as $6.03 in Hawaii — Americans are turning to political leaders for solutions to the rising costs at the pump. Solutions, however, may not be easy to come by.

Since President Barack Obama took office in January 2009, The Heritage Foundation reports the price of gasoline has spiked more than 67 percent. In an effort to tackle this rise, the president used his weekly address on April 30 to call for an end to subsidizing the oil and gas industries.

"That's $4 billion of your money going to these companies when they're making record profits and you're paying near record prices at the pump. It has to stop," Obama said in a campaign speech in California.

In Congress, Republicans and Democrats have taken two different angles in addressing the rising price of gasoline. Following the presidents lead, Democrats are targeting subsidies for oil companies, while Republicans are pushing for more drilling. Thursday, House Democrats tried to force a vote to repeal oil company subsidies using a procedural move, but Republicans rejected the effort.

The Washington Examiner reports Democratic proposals would repeal a domestic manufacturing tax credit, which is available to all manufacturing firms, but only for the five largest oil companies. Supporters estimate this would produce $12 billion in revenue over the next decade.

The plan to end subsidies for oil companies is drawing criticism from many who say the so-called subsidy for oil and gas companies is not a subsidy at all.

Reporter Christopher Taylor explains the difference between a tax break and a pure subsidy, saying that Democrats are calling tax breaks subsidies as a way to point the finger of blame for high gas prices.

Money businesses earn is their money and taxes are a small portion they send to the government, Taylor writes. Calling tax breaks a subsidy reverses that fact, turning earnings into something the government owns, while taxes become the government allowing the company to keep some of their earnings.

Although Senate Majority Leader Harry Reid promised to push for a vote in the Senate, Sen. Mary Landrieu, D-La., told CBS News she didnt think the proposal would pass.

I think well have a very difficult time getting anywhere close to 60 votes, Landrieu said. To single out oil and gas companies just to score some political points is not something Im supportive of.

While some may criticize the Republicans for "favoring" oil companies by opposing the tax change, a spokesman for Rep. Paul Ryan, R-Wis., told Reuters that the Republicans budget resolution, which passed the House on April 15, should close tax loopholes and scale back or eliminate deductions for all businesses, including oil companies.

Even if the Democrat proposals gain steam, some sources — including a Feb. 3 Committee on Natural Resources Democratic Staff Report — report that it wouldn't have any impact on prices at the pump.

Jack Gerard, president and chief executive of the American Petroleum Institute, told CNN that raising taxes on the oil and gas companies is a red herring being used to distract attention from the ineffective energy policies of the Obama administration.

In an API report, the institute states that U.S. oil and natural gas companies paid income taxes at a rate that was 70 percent higher than the effective rate of the S&P Industrial companies and provides almost $100 million every single day to the federal treasury.

Our government doesnt support our industry, Gerard told NewsOK on Thursday. Our industry supports our government.

Charles Ebinger, the director of the Energy Security Initiative at the Brookings Institution, said ending the tax break wouldnt be the end of the world, but that it would have a negative impact on the economy overall.

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