President Obama Calls for Removal of Oil Subsidies

March 29, 2012 Updated: March 29, 2012

President Barack Obama on Thursday called on Congress to end billions of dollars in subsidies to oil companies, even as the Senate rejected a Democratic bill to repeal tax breaks.

“Today, Members of Congress have a simple choice to make. They can stand with big oil companies, or they can stand with the American people,” the president said in an address from the White House Rose Garden.

Obama said that the three biggest oil companies had been making record profits, taking home $80 billion in profit last year. U.S. consumers were now being hit twice, he said.

“You’re already paying a premium at the pump right now. And on top of that, Congress thinks it’s a good idea to send billions more of your tax dollars to the oil industry?”

Just hours later the Senate rejected a Democratic bill repealing the subsidies by voting 51–47 to support a filibuster, not only from Republicans but also some oil state Democrats.

The bill proposed by Sen. Robert Menendez (D-N.J.) was designed to redirect money gained from ending the subsidies to both reduce the deficit and extend expiring renewable energy and efficiency tax incentives.

In his fiscal year 2013 budget request, President Obama proposed to cut at least eight oil and gas subsidies, which would save U.S. taxpayers an estimated $38.6 billion over the next 10 years. Instead of taxpayers subsidizing a highly profitable industry, Obama said, “We should be using that money to double-down on investments in clean energy technologies that have never been more promising.”

Around 70 percent of Americans say high gasoline prices are causing financial hardship, according to a recent CNN/ORC poll released March 29. The president has argued that the subsidies will help reduce oil prices.

Congressional Republicans and the oil industry deny the assertion, saying that ending the subsidies will see gasoline prices rise—not fall—and will be counterproductive to the industry.

“Is this the best we have to offer folks who are staring at $4 a gallon gasoline? A bill that even Democrats admit won’t do anything to lower the price of gas?” Sen. Mitch McConnell had said earlier in the week.

The petroleum industry describes the subsidies as “tax provisions.” Ending them would be the equivalent of raising taxes and causing oil prices to rise, a decline in the domestic industry affecting job growth, and an increased reliance on foreign energy.

“The proposal–which is expected to fail with bipartisan opposition–is a political distraction from high gasoline prices and our nation’s failed energy policies,” said John Felmy, chief economist of the American Petroleum Institute, in a statement.

White House spokesperson Jay Carney said the president would continue to pursue the issue.

“Well, you can be sure he won’t stop calling for this, because we simply cannot afford, and it makes zero sense, to have American taxpayers subsidize oil and gas companies that are enjoying record profits,” he said in a press briefing.

Carney said oil and gas company executives have even admitted “that at a time of record-high profits and high prices for oil that they don’t need the incentives that the subsidies were meant to create.”

John Hofmeister, a former CEO of Shell Oil, said as much last year, telling the National Journal Daily: “In the face of sustained high oil prices it was not an issue—for large companies—of needing the subsidies to entice us into looking for and producing more oil.”