Senate Republicans Block Windfall Profits Tax on Big Oil Companies
Democrats fall eight votes short of preventing filibuster
With gasoline prices topping $4 a gallon, Senate Democrats wanted the U.S. government to throttle back on the billions of dollars in profits being taken in by the major oil companies. But with the White House threatening a veto of the bill, the Senate voted 51-43 to close debate, well shy of the 60 votes needed to avoid a filibuster.The proposed windfall profits tax would have been somewhere between 10 and 12 billion dollars for this year, and it would have been levied against the country’s five largest oil companies. The legislation would have also rescinded $17 billion in tax breaks the companies expect to enjoy over the next decade.
“The oil companies need to know that there is a limit on how much profit they can take in this economy,” said Sen. Richard Durbin of Illinois, warning that if oil prices are not reined in, “we’re going to find ourselves in a deep recession.”
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A statement issued by the White House’s Office of Management and Budget (OMB) said, “Rather than addressing the principal cause of fuel price increases — rising world petroleum demand without a similar increase in supply — (the bill would) undercut U.S. energy security and decrease U.S. energy production, thus exacerbating market tightness and increasing energy prices.”
I find it quite striking that the White House is still claiming that the principal reason for the precipitous jump in oil prices is the rise in global demand, when according to Chevron Vice President of Strategic Planning, Paul Siegele, demand is not currently on the rise. Siegele raised this very point with me less than two weeks ago at a panel discussion at Stanford. (For more on the slowing of global oil demand, this article in MarketWatch reports on the International Energy Association’s projected slowdown).
Following the bill’s defeat, Democrats said they may work on separate legislation to increase oversight of trading by the Commodity Futures Trading Commission. Many argue that one of the principal drivers of rising gas prices is actually because of futures speculation on the commodities market. Sen. Charles Schumer (D-NY) said that parts of the windfall tax bill including commission provisions could be split into separate proposals.
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Are you kidding me? Please tell me you’ve taken econ.
The oil companies aren’t screwing us. Granted, you see “record profits” and you get pissed. But go and take a look on Yahoo! Finance and check out their profit margins. 10%. That is normal for a S&P 500 company.
And what is raising taxes going to do? Lower prices? No. Sorry.
I would like to know why this would be a good idea for the American consumer because that what our government is for, to help the public.
Andy, yes I did take econ, although I don’t claim to have liked it.
I am not suggesting that the oil companies are necessarily price gouging, I am suggesting that steps need to be taken to reduce or stabilize our demand on oil.
The Republicans seem to suggest that the only way we can possibly reduce the price of gas is to ramp up supply. But is increasing the supply of oil, thus lowering costs and INCREASING CONSUMPTION WHAT WE REALLY WANT? Maybe our “equilibrium” price is not set right to begin with (see I DID take econ).
As you suggest, our government is to “help the public,” but do not confuse ‘the public’ with ‘the consumer’. Whereas, the ‘consumer’ might not give a crap about the environmental costs of oil consumption, the ‘public’ might. That is exactly the problem with explaining everything purely economic deterministic terms - it obscures the larger political reality (or, what economists like to call “externalities”).
I think this will have a serious backlash against McCain who will be seen as the status quo Republican who will protect the big oil companies over the common consumer. This won’t bode well come November.
Andy,
I think one of the most important points here is the rescinding of tax breaks these companies already get. Noone in their right mind would argue for subsidizing corporations making this kind of profit…
I’ll admit that I’m a little conflicted about the govt. stepping in and increasing taxes on an entity who happens to be really good at making money, except that we’ve paid them so much to do it already in the form of direct subsidies and tax breaks.
The numbers I have heard say the oil companies make about 4% on a gallon of gasoline,while our government rakes in about 15% on a gallon.Seems to me the crooks might just be in Congress.
ON both sides of the aisle!
The tax breaks that big oil receives are criminal and highly unethical. It has always been my understanding that these sort of government assistance programs were to help struggling business people. The issue of the windfall profit tax is a debatable point. The money that is given to the oil industry in the form of these tax breaks should be put right into R&D of renewable energy. With so many of our representatives in government in the pockets of the oil companies, this should come as no surprise.
Tim,
“The Republicans seem to suggest that the only way we can possibly reduce the price of gas is to ramp up supply. But is increasing the supply of oil, thus lowering costs and INCREASING CONSUMPTION WHAT WE REALLY WANT? Maybe our “equilibrium” price is not set right to begin with (see I DID take econ).”
Haha I see you did take econ. But it seemed like you were railing on the Republicans because they blocked this bill. The bill would not solve anything, are we in agreement of that at least?
But from what I see from people is that they (not all of course) would take lower prices over the environment in most cases here. I believe that people would want to open up ANWR and risk the environment, to potentially lower gas prices.
Greg- exactly right.
Amy- “The tax breaks that big oil receives are criminal and highly unethical.”
Please do some research into this stuff. Remember when we were paying a dollar for a gallon of gas? Yeah well the oil companies weren’t making much money then but nobody cared. So the government gave them these tax breaks (great, more government, right?) when oil was $10 a barrel.
Plus, the merger of Exxon and Mobil happened around the same time because it was harder for them to make money with a barrel of oil so low.
Granted, I’m sure the oil companies could live without the tax breaks, but lets not lump that into the same bill as a windfall profits tax.
Also, if this was not an election year, there is no way this bill is ever raised.
I guess I just want to get across the point that oil companies aren’t “evil” as they are portrayed in the media.
We live in a capitalist society and they are providing a product and service that America uses and needs everyday to function.
If you’re typing on a Mac right now, or listening to your iPod, or using windows, you better start writing your congressmen to tell them to tax Apple and Microsoft the same windfall taxes because they’re making a lot more off of you in profit margin than Exxon is.
“The Republicans seem to suggest that the only way we can possibly reduce the price of gas is to ramp up supply. But is increasing the supply of oil, thus lowering costs and INCREASING CONSUMPTION WHAT WE REALLY WANT? Maybe our “equilibrium” price is not set right to begin with (see I DID take econ).”
Um, no one is proposing increasing consumption. Rather, many are for maintaining, even decreasing, consumption, at reasonable fuel prices. Succintly stated at http://littlemissattila.mu.nu/archives/266253.php :
(Congress wants to) “force conservation, force biofuels, force diesel. And we should do it on the backs of the poor and the middle class.
After all, if someone can’t afford a Prius: well, fuck ‘em. And, by the way: those who are suffering from the dictatorships and authoritarian governments propped up by American fuel dollars? Fuck them, too.”