Paul Driessen

President Obama and Senate Democrats need to take Lemonade Economics 101.

Tell a ten-year-old that the federal government is going to make him pay 25 cents for every glass of lemonade he sells at his corner stand, and he will say he’ll have to charge an extra quarter per serving – or simply close up shop. He certainly won’t say he’ll lower his prices.

But President Obama wants us to think he can compel oil companies to lower the skyrocketing pump price of gasoline, by eliminating business tax deductions for certain major companies, and raising their cost of doing business by what he admits would be $4 billion a year.

In fact, regular gasoline averaged $1.85 per gallon when Mr. Obama took office. It is now $4.20 a gallon in much of the Washington, DC area, over $4.00 in many regions, and heading north as summer approaches. The impact on commuters, family budgets, vacation plans, and shipping food and other products has been horrendous, and is getting worse.

In reality, oil companies don’t get subsidies. They get tax deductions for exploration, drilling, refining and other business expenses. Eliminating those deductions is effectively a tax hike, and the companies will have to pass those tax hikes on to their customers – further increasing pump prices.

And yet Senate Democrats recently offered an amendment that would eliminate various tax deductions for five major oil companies, turn the supposed savings into subsidies for wind turbine, solar panel and electric car makers – and use any leftover crumbs to “pay down” our skyrocketing budget deficit.

The ploy needed 60 votes – but got only 51, despite the President’s vocal support. “Members of Congress,” he said, “can stand with big oil companies, or with the American people.”

However, the American people are no longer buying the partisan rhetoric.

They increasingly understand that new taxes and restrictions on oil companies are not in their best interest. In fact, a recent Harris Interactive poll found that over 80% of US voters support increased domestic oil and gas production, to create and preserve jobs, lower pump prices and increase government revenues.

They understand that only 12% of what they pay for gasoline goes to oil companies for refining, marketing and distribution. Another 12% is state and federal taxes. Fully 76% is determined by world crude oil prices – and thus by global supply and demand, and confidence or fear about world events.

Americans understand that eliminating tax deductions for expenses incurred in producing and refining oil is the same as imposing new taxes. Those taxes would result in curtailed drilling and production, reduced royalty revenues, worker layoffs, still higher gasoline prices, and increased costs for everything we grow, make and transport with petroleum. Blue collar, poor and minority families would be hurt worst.

Every US business claims deductions for new equipment, facility depreciation, utilities, payroll, research and other expenses. This ensures that businesses, like individuals, recover their costs and get taxed only on their net incomes.

Five oil companies should not be singled out and punished as the sole exception to this rule.

Legitimate expense deductions are very different from subsidies. Subsidies amount to government taking money from individuals and profitable companies, and transferring it to politically favored companies and products that could not survive without perpetual support.

The system is even more insidious when the subsidized entities return substantial portions of their taxpayer largesse as campaign contributions to President Obama and other politicians who arrange the wealth transfers.

Other facts make the practice still more disreputable. “Alternative,” non-hydrocarbon energy is often justified by assertions that we face imminent manmade catastrophic global warming. In reality, as NASA scientists recently emphasized, virtually no empirical evidence supports hypotheses, assertions or computer model projections about melting polar icecaps, average global temperatures, storm frequency and intensity, sea levels and other natural phenomena.

Wind, solar and biofuel energy are also justified by claims that we are running out of oil and gas. In fact, America is blessed with vast proven petroleum reserves, and even greater undeveloped prospects that our government has made off limits. The natural gas and hydraulic fracturing revolution is merely a hint of the energy, jobs and revenues Americans could produce, if certain politicians would end their obstinacy.

Yet another “renewable” argument is that petroleum “keeps us trapped in the past.” In truth, we need to worry about the present, especially our depressing unemployment and unsustainable debt. Oil and gas provide 60% of America’s energy. By contrast, despite untold billions in subsidies, wind and solar combined still provide barely 0.60% – and are unlikely to do much better for decades to come.

Oil companies do make a lot of money, because they produce, refine and sell the enormous quantities of fuel and other petroleum products that are and will long remain the foundation of our economy. But they also pay billions in taxes and royalties – and produce real energy: abundant, reliable and affordable.


Paul Driessen

Paul Driessen is senior policy adviser for the Committee For A Constructive Tomorrow (CFACT), which is sponsoring the All Pain No Gain petition against global-warming hype. He also is a senior policy adviser to the Congress of Racial Equality and author of Eco-Imperialism: Green Power - Black Death.

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