Congressional Democrats and environmentalists are resurrecting their calls to end a suite of tax breaks for the oil industry as the largest energy companies have announced their second quarter profits this week and debt discussions are dominating Capitol Hill debates.
The Senate in May voted down a proposal from Sen. Robert Menendez (D-N.J.) that would have repealed several tax breaks for the largest oil companies in order to pay down the deficit by $21 billion over the next decade. The vote came as both parties in Washington tried to score political victories from the soaring oil and gasoline prices plaguing the nation.
The Senate vote in May failed, but that has not stopped some lawmakers from continuing their calls to strip the industry of the tax incentives.
"America is swimming in debt, and oil companies are swimming in profits, yet Republicans continue to defend giving these companies special tax breaks that could help reduce the deficit if they were repealed," Rep. Ed Markey (D-Mass.), ranking member of the House Natural Resources Committee, said in a statement. "Instead of asking seniors for a cut in Medicare or Social Security, it's time for the oil companies to do their part and contribute to solving our debt crisis."
The latest messaging from Democrats and environmentalists comes as Congress is embroiled in a bitter fight over the debt limit -- along with possible tax increases and spending cuts -- and as oil companies are reporting second-quarter profits.
Earlier this week, BP PLC reported second-quarter earnings of $5.6 billion, a hefty improvement over the same quarter last year when it reported a net loss of $17 billion related to the oil spill in the Gulf of Mexico -- but down 21 percent from the $7.1 billion in profits posted during the first three months of this year.
"BP's 'disappointing' quarter of only $5.6 billion in profits shows just how absurd their taxpayer subsidies are," Menendez said in a statement. "Without them, BP would have had to scrape by with just $5.5 billion in profits this quarter."
"Why some in Congress think BP deserves these extra profits but seniors do not deserve Medicare is beyond me," Menendez added. "We need a balanced approach to reducing the deficit."
Yesterday, Exxon Mobil Corp. and Royal Dutch Shell PLC reported 41 percent and 97 percent increases in profits, respectively. Exxon Mobil earned $10.7 billion in April, May and June of 2011. Shell earned $8.7 billion during the same time period. Chevron Corp. will announce its earnings today.
"It's outrageous for taxpayers to be writing checks to the oil industry at the very moment when we're talking about austerity budgets due to lack of revenue," Oceana senior campaign director Jacqueline Savitz said in a statement. "Why should those who are posting record profits be exempt from sharing the sacrifices we all will be making?"
But oil industry advocates say the profits are crucial to prolong investment in domestic energy production.
The American Petroleum Institute earlier this week attempted to quell the expected criticism by releasing a analysis that it says demonstrates the oil industry's impact on the economy.
"When our industry does well, much of America does well also," Kyle Isakower, API's vice president of regulatory and economic policy, said in a briefing with reporters Monday, adding that the industry's reinvestment drives "economic progress and translates to billions of jobs supported, vast amounts of retirement income protected and billions in government revenue generated."
Shell Oil Co. President Marvin Odum sounded the same note yesterday. "When you see big headline numbers come from a company like Shell, it relates directly back to the size of the company. So when the business is doing reasonably well, the numbers are going to be very large," he told reporters after a speech in Washington, D.C. "I think the real question is the amount of profit that's been made based on the business that we do and what are we doing with that money in terms of reinvestment."
"You basically see us investing at higher levels than we have profit coming into the company," he added. "But then also recognizing the stimulus that the economy, revenue to the federal government, and so forth, it comes from having that business take place.
And he took the argument a step further.
"More oil and gas production, more energy production means more revenue into the federal government. Getting it through additional taxes, which disincentivizes more development, is the wrong way to do it."