Big breaks for Big Oil

Opinion: February 1, 2011 at 12:00a.m.

Los Angeles Times: Analysts are expecting a bonanza when Exxon Mobil Corp. announces its fourth-quarter earnings on Monday; the company’s stock has jumped by nearly 20 percent during the last year, and in the first three quarters of 2010, its profit was $21.2 billion — not a bad haul during a worldwide recession. Other oil companies have had similar success, thanks to growing demand in India and China. Yet U.S. taxpayers subsidize this industry to the tune of $4 billion a year.

This kind of largesse toward a hugely profitable business seems bizarre, especially at a time when the federal deficit is reaching alarming proportions, yet efforts to end the tax deductions and credits for companies that don’t need them have gone nowhere. That isn’t stopping President Obama from trying. In his State of the Union address, he proposed an uptick in federal spending on clean-energy research and development, to be paid for by ending subsidies for oil companies.

He is of course right, but that won’t stop Republicans and oil-state Democrats from thwarting his plans. Obama has been trying since his first year in office to cut oil subsidies, calling in his last budget request for the elimination of $36.5 billion in industry tax breaks over the course of a decade. Congress turned him down.

Job killer?

The oil industry and its backers claim that ending these breaks, such as a domestic manufacturing tax deduction and deductions for certain “intangible” drilling expenses, would cause oil and gas prices to rise and cost American jobs.

Independent analyses suggest that isn’t true. A 2007 report by the Joint Economic Committee, which advises Congress on economic matters, found that ending the manufacturing deduction would have a negligible effect on consumer prices.