Targeting oil companies' profits as gasoline prices continue to rise, U.S. Rep. Marcy Kaptur (D-Toledo) is urging Congress to vote on ending tax breaks the companies receive for certain operating costs.
Speaking outside the Toledo-Lucas County Port Authority's offices on Sunday, Miss Kaptur urged House Speaker John Boehner (R-West Chester, Ohio) to allow the House to vote on President Obama's proposal to end $4 billion in oil-industry tax benefits. But she conceded that such changes would provide little immediate relief at the pump.
Boehner signaled interest last week in ending some tax subsidies for oil companies, but Miss Kaptur said he is now "backtracking."
"Oil company lobbyists are telling Speaker Boehner they can't afford to give up their tax breaks," she said. "He should listen to the American people instead."
Miss Kaptur displayed a chart showing the increase of profits for major oil companies from January through March. The profits included the $10.7 billion ExxonMobil reported. Americans are facing sticker shock at the pump, but "These companies are smiling all the way to the bank," she said.
The tax breaks include a deduction for the cost of drilling, along with oil and gas depletion allowances. The Obama Administration argues high oil prices provide ample profit motive to explore for oil and gas, and that the tax breaks are not needed.
Two rounds of price increases last week sent self-service regular rocketing past $4 a gallon at area stations, and a second round Thursday put local prices into the mid-$4.10s, close to the record set three years ago.
Prices at the pump in Northeast Ohio increased 20.5 cents this week. This current increase brings the average price for a gallon of self-serve, regular unleaded gasoline to $4.111.
According to AAA's Fuel Gauge, at the close of formal trading on the NYMEX Monday, crude oil settled down 41 cents at $113.52. This comes following a settlement price of $113.93 per barrel to close last week -- the highest price since August 2008.
Skyrocketing gasoline prices since mid-February have been blamed on a combination of factors.
Those included rebellion in Libya and other civil unrest in oil-producing Middle Eastern nations, speculation in commodities prices, increased demand for oil in China, and the approach of the summer driving season in the United States.
Reports of ongoing and increasing unrest in Libya, Syria, Yemen, Nigeria, and the wider Middle East and Northern Africa (MENA) region continued last week. Government forces fired on protestors in Syria; NATO-led bombing continued in Libya with no quick return crude production expected; and OPEC-member and Africa's top oil-producing nation, Nigeria, saw reports of post-election violence.
While this news did add upward pressure to crude oil prices, the bulk of attention was focused on the Department of Energy's (DOE) weekly report and the Federal Reserve's (Fed) two day meeting that was capped by an unprecedented press conference by Fed Chairman Ben Bernanke. The DOE report showed a tenth consecutive week of drawdown in U.S. gasoline supply. While a decline is not unusual at this time of year, as suppliers lower stocks during the switch from winter- to summer-blend gasoline, this most recent report has stocks at 205.6 million barrels -- 18.1 million barrels below the same period last year. It is worth noting that these numbers came alongside data that showed a slight week-over-week increase in gasoline demand.
Some analysts have speculated this data could capture demand for travel during the Easter weekend, which may be masking the extent of demand destruction taking place. Traders will be closely watching this week's DOE report for a clearer picture of the impact that high prices at the pump are having on demand for gasoline. This upward pressure on crude oil prices was compounded by Chairman Bernanke's announcement that the Fed would continue efforts to stimulate economic growth through low interest rates. This monetary policy is expected to continue the devaluation of the dollar.
As the dollar loses value, the price of U.S. commodities, such as crude, are driven higher as they become relatively cheaper to buyers holding foreign currencies.
Today, the markets have worked to digest President Obama's announcement that Osama bin Laden had been killed by U.S. forces in Pakistan. While news of bin Laden's death marks an important victory in the war on terror and a blow to al Qaeda operations, it does not have an immediate impact on instability in the MENA region.
Crude oil touching multi-year highs, coupled with the change from winter-blend to summer-blend gasoline taking place in many parts of the country, means that drivers have seen gasoline prices at the pump continue to rise. The current national retail average price for a gallon of self-serve regular gasoline is $3.967. This is up 9.8 cents from a week ago, 32.2 cents from a month ago and $1.072 from a year ago. Currently 14 states plus the District of Columbia are at or above the $4 mark.
While acknowledging that reducing the oil and gas companies' tax deductions would be unlikely to reduce retail gasoline prices, Miss Kaptur said the additional revenue could be used to reduce the national deficit or could be paid out in what she called a "consumer refund."
President Obama has proposed using the funds for alternative-energy programs.
Kaptur said the United States' petroleum imports are a continuing strategic vulnerability, and she has supported alternative energy development as a route toward energy independence.
Senate Majority Leader Harry Reid (D., Nev.) has said the Senate could consider the tax subsidy proposal this week.
By Nolan Rosenkrans - The Blade, Toledo (MCT)
Copyright (c) 2011, The Blade, Toledo, Ohio
Distributed by McClatchy-Tribune Information Services.
To see more of The Blade, or to subscribe to the newspaper, go to http://www.toledoblade.com.