Obama Seeks to Slash Oil Subsidies in 2012 Budget

The Obama administration released its 2012 budget today, highlighting a series of spending cuts and revenue increases that the White House says could save the country $1.1 trillion over the next decade. Included in the proposal are the elimination of so-called “tax preferences” to oil and gas companies that are set to cost taxpayers more than $43 billion over the next ten years. Meanwhile, Democrats in the House of Representatives introduced parallel legislation seeking even an more drastic cutback in support to the fossil fuels industry. The “Ending Big Oil Tax Subsidies Act” would eliminate 10 subsidies and tax breaks currently offered to oil companies, saving the government $40 billion over the next five years.

Though similar attempts to reduce taxpayer support for the industry have failed to get out of congress, Democrats seem to be targeting the newly elective wave of “deficit hawk” conservatives—many of whom are aligned with Tea Party movement—in an effort to force them to prove that they are consistent in their promise to cut spending wherever possible.

“It makes no sense that we are borrowing money from China to subsidize the most profitable industry in the world and corporations like ExxonMobil that earn billions every year,” said Rep. Earl Blumenauer in a press release. “It’s time for us to have a serious, rational discussion about cutting the budget.”

Fearing that the tactic might actually pick up steam with small-government Republicans and moderate, industry-friendly Democrats, the oil lobby is said to gearing up for a fight on the issue. “In the current dynamic, we can’t take anything for granted,” said the American Petroleum Institute’s Marty Durbin, to the Houston Chronicle on Sunday. “Given the strong desire for new members of Congress to want to show they are really doing something on cost cutting and deficit reduction, you never know what could get thrown in the mix.”

In the past, the industry has said that any cuts to the subsidies would simply be passed on the consumers, effectively acting as a “backdoor” gas tax. But with prices already higher at the pump and a flood of new fuel-efficient vehicles on the market, Americans now have the option to cut their fuel consumption instead of being held hostage by industry threats and rapid fluctuations in the energy market.


  • Lad

    Yes! you can expect to see the price of gasoline go up if the oil companies lose their pay-off money. So what? We can now fight back because we have alternatives…BEVs and plug in cars.

    The oil subsidy issue is a way that politicians receive your tax money for their election campaigns. The Congress approves the subsidy and the oil lobbyists pick and choose the politicians the oil company will pass the money back to.

    It’s been going on for years and is a typical example of how your Congressman/Senator are owned by Big Business.

  • usbseawolf2000

    If the price of oil raises, would the price of electricity raise as well? Probably not as much but it should raise up as well.

  • JamesDavis

    It has always amazed me why a billions of dollars a year profit company would need welfare from the taxpayers, whom most of them are on welfare and can barely afford to buy food or clothing for their children or keep a roof over their heads. Like President Obama said (my own understanding), “I don’t know if you noticed, but I think these companies are doing quite good on their own. We should stop the subsidies and put it into clean energy research and production.” If that 43 billion dollars was put into electric car and battery production, we could be free from the gas pump so fast that you would not realize that you don’t have to stop at a gas pump anymore to fill up your vehicle. You may even have trouble remembering to unplug your car of mornings before heading out the garage to work…what a great feeling that would be.

    We need to stop believing these fossil fuel companies when they say that we will be plunged into darkness if we stop giving them welfare. They don’t scare me because I know they are full of crap and if they dried to plunge America into darkness, we would have another uncivil war and they would become the victim of our anger.

  • J

    I am going to the Chicago Auto show this weekend to decide which electric to buy. Then I will not have to worry so much about oil prices.

  • Anonymous

    Lets see: The budget deficit is about 1.5 Trillion, and the cure is to raise taxes on oil companies by about 4.3 billion. Thus this proposal to cut the deficit by one tenth of one percent would simply shift the burden to those who buy gasoline. Brilliant!

    And notice the hog wash, “tax preferences,” tax subsidies,” saving the government 40 billion”, equating raising taxes with cutting spending.

    Of course we need to close the loop holes for oil companies, and use
    the added revenue to fund EV and PHEV incentives. But give me a break, the spend, spend, spend liberals need to offer a budget the reduces spending by 150 billion rather than increase taxes by a 150 billion. And we need to cut the deficit by at least 150 billion again next year and the year after and so on until the budget is balanced.
    This is not rocket science.

    If we add it up, 1,350 billion, 1,200 billion, 1,050 billion, 900 billion, we might only add 4.5 trillion to the national debt in the next five years. See the problem?

  • Anonymous

    If the revenue increases by about 4% per year over the same 5 years, due to economic recovery and elimination of stiffing regulations, rather than increasing taxes, this would also cut the deficit by (88 + 91 + 95 + 99 + 103) about 475 billion so 5 years out the deficit would be about 425 billion assuming the spending had been cut as outlined in the above post.

  • JamesDavis

    “Anonymous #1″ Did this kind of information come out of your mouth when Bush spent $2.3 trillion, including the $450 billion he threw out the door, before he left office, to the banks with no accountability or responsibility, on two worthless wars that killed thousands of American children, husbands, wives, moms and dads that he sent to foreign countries and spent taxpayers money like a drunken sailor and drove the deficit up into the trillions and collapsed the American economy in doing so and left us nearly 3 trillion in the red? Bush left us with the largest deficit in American history and you are blaming President Obama for spending a fraction of that amount to regain the stability of our economy.

    I know you are suffering from the Republican’s “Convenient Memory Loss”, so I will refresh your memory. It was the spend, spend, spend conservatives that plunged this country into the worst recession ever in our history, and it was the conservatives who went behind closed doors and practically eliminated the tax for big business who was, and still is, making billions in profit, and it was the conservatives who eliminated all funding for clean energy research and development and gave it to fossil fuel production – oil, coal, nuclear, and natural gas.

    You go on with your ‘rich bitch rants’ about Obama giving a couple of billion to electric car/battery research and production, solar, wind, wave, and Geothermal and squeal like a virgin pig on its wedding night about cutting funding to oil, coal and natural gas and directing it to clean energy production and raising tax on the wealthy so they can pay their fair share instead of living off the backs of the poor.

    What planet or oil well did you crawl out of?

  • Samie

    Lets bring this discussion back to reality. Minimal amounts of subsidies will be taken away from the petroleum industry. Wake up! This is a ploy, bargaining chip so to speak to keep other areas of funding intact.

    Petroleum industry will spin the reduction of subsidies as a tax increase, which they will be forced to pass on to customers. Fear and blame for higher prices at the pump while the economy is still recovering will be a huge part of their counter efforts. Same politics as normal & revolving door big shots in DC will earn their keep. I will say if tea-party politicians reduce oil subsides based on ideologies of less government spending, that will be a surprise & gain some actual legitimacy for not being rank & file politicians.

    On the other hand, threats to reduce tax cuts & subsidies for the petro industry could be a great bargaining chip to force legislators in passing real comprehensive energy legislation.

  • Anonymous

    Spin closing loop holes in the tax code as a tax increase? It would increase the amount of taxes paid by oil companies, and those increased costs would be passed along to consumers. Any tax on “corporations” is simply a way to hide the tax in the price of the product. Rather, spin is to call a tax increase a deficit cut to equate it with a spending cut. Spin is to say increased taxes “saves the government” money.”

    Does correctly pointing out that during the Bush years, spending increased faster the revenues make it ok to continue the practice during the Obama years? Liberals seem to accept that two wrongs make a right, but that sort of thinking is insane. We cannot do much to save the planet with insults, smears, spin and irrational arguments.

    Anyone offering less than 150 billion a year spending cuts is not actually trying to restore freedom, but is instead, pushing socialism by another name.

  • Anonymous

    JamesDavis keep your political preferences to yourself. This isn’t the only article I’ve seen you rant about them.

  • Anonymous

    Anonymous, interesting comments but I would like you to remember three things.

    1. It is extremely important to recognize spin, & the tactics involved with it. Don’t be turned off by it, knowing how someone is going to shape traditional arguments can be a huge advantage to advancing your cause. Why the media can’t see this, I don’t know, sometimes people are blindsided by emotions.

    2. Basic economics can tell you that everything has costs. Want more than 150b cut? Raise taxes &/or cut spending BUT say you reduce important educational services. You risk long-term lower revenue on income collected, you may have to increase welfare services, you may also need to spend more on crime protection. Basic story, but you get the point that everything has costs, you just shift them around so to speak.

    3. Not all taxes are passed on to the consumer. The business shares the burden with the consumer, what percentage depends on market conditions and on the elasticity of the product. Again, just a basic illustration which is more complex in detail for this comment.

  • Anonymous

    I have difficulty “remembering” your points, since they are news to me.

    1. If you trust in the judgment of others, you believe others should be well informed, rather than mislead by deception, i.e. spin.

    2. What if we cut spending on education and improved education. The unionized system of today fails to graduate a high percentage. Why not let a market driven system bring improved performance? Lets say a school system spends $8000 per student. Why not offer $5000 dollar vouchers. The student would get improved education at a private school, and the public school system could pocket $3000.
    Everybody wins except the unions.

    3. Not all taxes are passed on? Of course they are. Otherwise the company goes bankrupt. Now folks who are paid to deceive can claim this money goes here and that money goes there, so the tax comes out of profits, but it is nonsense because the profits come from the product. A rose by any other name…

  • Anonymous #n

    Reuters: Carmakers push back on efficiency aims

    [...] Two years ago, struggling automakers, some receiving billions of dollars in taxpayer aid, agreed with the Obama administration to raise average fuel efficiency 40 percent to 35.5 miles per gallon by 2016, the largest jump ever.

    But they are drawing the line at more aggressive mandates, making it their top lobbying priority in Washington as they emerge from a four-year slump that devastated U.S. production. [...]

  • John7070

    Tax cut or not hasn’t gas prices gone up and they will keep going up tax cut or not so why not do this? When I started driving gas was less than $1.00 now it’s almost $4.00 and the Petroleum industry pays less in taxes then most Americans do why is that?a

  • Nasdram

    Sure, the Oil companies might pass on the cost. But that will also push more and more to try alternative fuels out. So if they increase cost of gas too much, they will loose more and more market share.
    So i really think in the long term, it would benefit everyone as a higher market share for Hybrid/EV would mean more mass production of batteries -> lower price.

  • Anonymous

    Only 1 % of US Electricity comes from Petroleum. So any increase in Petroleum is not going to increase the Electricity price.

    Yes the Oil Companies should be asked to pay more royalty. They produce Oil for $20 / barrel and sell for $90 and pocket the $70.

    If they increase the price of gas, people will simply move towards smaller vehicles or alternative fuels.

    Already there are
    20 million Flexfuel vehicles
    14 million LPG powered
    12 million CNG powered.

    The share of these alternatives will increase.

  • Pat P

    Oil companies sell oil on the world market. Refiners buy oil on the world market. So how do Oil subsidies help the US taxpayer? Are we trying to decrease the price of oil on the world oil market with our tax money? Seem rather inefficient. And its also self defeating if we want to reduce dependence on foreign oil.
    Subsidies are supposed to help us. Now if we help subsidize solar industry in the US we get a direct return. We end up buying energy from US producers and we get energy independence from the world market which is dependent on the Mideast.

  • Anonymous

    Lets see: “The petroleum industry pays less taxes than most Americans.” If petroleum industry taxes are passed on in the form of higher prices, then to raise petroleum industry taxes simply raises the taxes most Americans pay.

    It might seem sound to encourage the spenders by providing more taxes in the name of sound environmental goals, certainly the majority of voters reflect that thinking. I see nothing wrong with closing the loopholes which would increase petroleum taxes my 4.3 billion a year, but it burns my toast for people not to realize raising petroleum taxes simply raises hidden taxes on the American people, adding to the misery index.

  • Anonymous

    anonymous says:

    “… but it burns my toast for people not to realize raising petroleum taxes simply raises hidden taxes on the American people, adding to the misery index.”

    how is that worse than paying traditional tax then have hidden payments to oil companies? like it or not, this is more transparent (and probably more efficient) than paying gov tax to give it to oil companies. what you spend is what you get taxed. i got no problem with that. as many posters already pointed out, oil companies are too afraid to show the public the real costs because people will start to turn away. your jig is up.

  • Anonymous

    Mythology is an interesting topic.

    Do the American tax dollars pay oil companies? That was the claim. So the failure to tax is equated with giving tax dollars. So long as people buy that fiction, no real conversation concerning reality is possible.

    Notice the class warfare, the big corrupt oil companies are afraid to tell us the truth. I have not lived very long, just a little over sixty years, but during my lifetime, starting in WWII, governments have been the source of evil in our world. Mr. Hitler killed millions, Mr. Stalin killed millions, and Mr. Mao killed millions. The Taliban turned a public sports arena into a public hanging venue. We had ethic cleansing. Compared to the capacity of government to enslave and murder folks, corporations are milk-toast. Yet again and again folks advocating bigger more powerful and intrusive government, always for a “good” cause, keep pointing the finger at corporations.

    Yes, Mythology is an interesting topic.

  • Joe

    Best President since Jimmy Carter!

  • Anonymous

    this president has good common sense

  • rlgauthier@me,com

    Sorry, can’t buy your simplistic view. IF you want to make a real cut, cut medicare, medicaid and social security. Everything else is chump change. You cannot cut to a balanced budget, there is too much money tied up in entitlements such as SS, MC and MA. The Bush Tax cuts added 7T to the deficit. This deficit was created by conservatives, and conservatives alone.

  • RJ

    Where are the electric cars and trucks we can drove now, why are
    they dragging there feet…look at the gas prices…let’s get the
    electric cars and trucks on the streets now…we want to drive them…plug in high way speeds that go over a 100 miles on
    a charge…Thanks RJ

  • E

    Biggest loser is the teacher who gets a 50 percent salary cut and the student still fails because of lack of discipline by poor parenting.. Cut spending on the backs of the american working class, and we will see the biggest crises and failure in american history.. Leave the workers pay alone, Raise taxes on the wealthy, tighten the gap between wealthy and poor, regulate prices at the pump, force oil ceo’s to take salay cuts.. PERIOD

  • E

    Biggest loser is the teacher who gets a 50 percent salary cut and the student still fails because of lack of discipline by poor parenting.. Cut spending on the backs of the american working class, and we will see the biggest crises and failure in american history.. Leave the workers pay alone, Raise taxes on the wealthy, tighten the gap between wealthy and poor, regulate prices at the pump, force oil ceo’s to take salay cuts.. PERIOD

  • One problem

    Tax increase always role down hill and hit the little guy.

  • egorhythmia

    The 2011 federal budget generally hits education, labor, and health care. I know that each of the above has its role but at this rate we won’t have any specialists in any field. Chemical engineers have vanished while Indian colleges are investing massively in their future and this is only one example. What’s an average teenager to do ? Besides social media ?… how are they supposed to get a master in leadership when education as we know it hit rock bottom years back.

  • tapra1

    Meanwhile, Democrats in the House of Representatives introduced parallel legislation seeking even an more drastic cutback in support to the fossil fuels industry. Tech Expo