Can the GOP Break Its Oil Addiction?

April 29th, 2011 at 11:44 pm | 50 Comments |

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The problem with intellectual inconsistency is that it usually comes back to bite you. The House Republican leadership is getting a painful lesson in this regard because of their longstanding support for subsidizing the oil industry.

This largess—billions of dollars in special tax breaks and subsidies—has suddenly become a liability for a party that has made fiscal responsibility the centerpiece of its policy agenda.

The first sign of trouble came courtesy of a recent ABC news interview with House Speaker John Boehner (R-OH). Put on the spot, Boehner had trouble defending the oil subsidies saying “I don’t think the big oil companies need to have the oil depletion allowances…We need to control spending…And they ought to be paying their fair share.”

It was a good response for someone properly focused on getting spending under control. Unfortunately, the Speaker started backtracking from the statement as soon as he remembered that the President and other Democrats support ending these subsidies.

As Boehner was backtracking and Republicans were circling the wagons in defense of oil subsidies, Exxon and Shell reported huge quarterly profits that were up over 60 percent from the same period last year. Exxon reported $10.6 billion in profits for the quarter and Shell reported $8.78 billion.

In light of those profits, the GOP mantra that removing the subsidies and special breaks would result in a higher price at the pump sounds more like the utterings of a blackmail victim than it does lawmakers focused on sound public policy.

As Boehner and company were probably hoping the issue would go away, news surfaced that House Budget Committee Chairman Paul Ryan (R-WI) had expressed support for ending oil subsidies at a recent town hall meeting. When asked about oil industry tax breaks Ryan said:

We’re talking about reforming the safety net, the welfare system. We also want to get rid of corporate welfare. And corporate welfare goes to agribusiness companies, to energy companies, financial services companies. So we propose to repeal all of that.

It will be interesting to see if Republicans can be persuaded to go along with such a proposal—particularly in light of the campaign cash oil interests ply them with and the insistence by libertarian radicals like Grover Norquist that ending any tax break, regardless if it has outlived its original purpose, amounts to a tax increase.

For anyone who is truly in favor of the free market and fiscal responsibility, special corporate tax breaks and subsidies should not be the norm, nor should they be championed as the functional equivalent of lower across the board tax rates.

Special corporate subsidies and tax breaks, to the extent that they are used at all, should be temporary and targeted towards a very specific policy goal that is in the nation’s long-term interest—such as giving breaks to jumpstart renewable energy and new technologies, or encourage energy conservation.

If Republicans can garner the courage to make a clean break from their habit of subsidizing oil companies, they will not only strike a blow for intellectual consistency, but they will be helping our nation to break its oil addiction and give cleaner, more domestically available, alternative fuels a fair chance to compete in the market place.

If not, its special interest driven contortions will repel voters—just as they did in 2006.

Recent Posts by David Jenkins

50 Comments so far ↓

  • Nanotek

    “… and the insistence by libertarian radicals like Grover Norquist that ending any tax break…”

    if libertarians are pay-as-you-go, Norquist doesn’t seem at all libertarian; tax-evading and pay-as-you-go aren’t synonymous

    if so, the Norquist advocates would insist that corporations which pay no income taxes should be required to pay for their use of federal assets — like a very expensive American judiciary relied on to enforce their contracts and IP.

  • SqueekyFromm

    No. Us Republicans can not break our Oil Addiction. Let the Democrats show us the way. Let them walk to the polls in November 2012, and we will drive. (LOL)

    Plus, ending the oil subsidies is probably a good thing, but how does increasing the costs to the oil companies LOWER the price of gasoline???

    I am having MATH problems with this, and it doesn’t even require dividing fractions or anything hard like that. I don’t think???

    Squeeky Fromm, Girl Reporter

    • armstp


      All you are saying is if you do anything to slightly decrease the profitibility of oil companies then the price of oil will go up. That is complete bullshit.

      First, taking away oil subsidizes will do nothing to impact in any meaningful way the worldwide demand and supply for oil. The price of oil and therefore the price of gasoline is set it world markets. Taking away a few billion in U.S. oil company subsidies will do nothing to impact the world price of oil.

      Second, reducing profits on U.S. oil companies will just mean that these companies will have to only slightly cut their dividends. No big deal. It is a competitive market and if the oil companies attempt to pass on the loss of their subsidies to the consumer, those less subsidized companies will step-in to keep the price competitive.

      Third, if the U.S. has to absorb a slightly higher price because of a loss of subsidies, then so be it, but that will not be the main reason the oil price is high and will only present a penny or two of the price. The price is $4 and not $2 because the worldwide price of oil is $110 per barrel and not $60. Taking away U.S. oil company subsidiaries will not all of a sudden driven the price of gasoline in the U.S. up to say $6. Maybe it goes from $4.00 to $4.001.

      • SqueekyFromm

        No. I am saying it won’t make the price go down. Because think of why we are all fussing in the first place—The Gas Is Too D*mn High!!!

        Sooo, like you say, how does this (removing oil subsidies) address that problem???

        Uh, Earth to Everybody— It Don’t. DUH!!!

        Squeeky Fromm
        Girl Reporter

    • Houndentenor

      I’ve been walking to the polls for years. It’s a very efficient means of transportation.

  • valkayec

    Mr. Frum, a couple of things:

    - The libertarians I know, including the now famous libertarian videographer John Papola, claim that true libertarianism would not permit any subsidies or corporate welfare as it distorts markets, fails to allow creative destruction, prevents new competitors from joining in or competing in the marketplace, and pushes higher taxes on the majority of citizens to pay for the subsidies. Thus, Norquist (and surprisingly Ron Paul) is not a libertarian as he insists on maintaining subsidies that are anathema to true libertarianism.

    - Paul Ryan and the entire GOP House voted twice recently to continue the subsidies, so it’s hard to take Ryan at his word that corporate welfare for oil companies needs to be ended. I believe actions speak louder than words.

    I agree that if the GOP were smart, rather than just objectionist, they’d push for policies that reduce the nation’s need for oil as a matter of national & economic security and economic growth and international competition. Do they really want to give China the edge? Their policy doesn’t make a great deal of sense to me.

    • TheQuad

      You would think that they would really seize upon this issue as a matter of national security. Even if their voting record didn’t necessarily indicate a willingness to end the subsidies in the past, they have an opportunity to turn the narrative around on their own terms, instead of letting time do it for them by default, as foreign oil dependence will become a louder and louder issue.

  • AlanDownunder

    I see no inconsistency between continued oil subsidies and fiscal responsibility. Fiscal responsibility is less tax – not deficit reduction or surplus creation, which is fiscal responsibility as misunderstood by Democrats. That’s why, despite Clinton bequeathing a surplus and Reagan and the Bushes bequeathing deficits, the GOP remains the party of fiscal responsibility. Since the oil subsidies are akin to tax breaks they ARE fiscally responsible.

    • zephae

      Alas, its the true voice of the GOP!

    • TerryF98

      This post must be a spoof or snark of some kind, if not it’s quite unbelievable someone would actually think this.

      • AlanDownunder

        What is truly unbelievable is that the GOP behaves exactly as if this is what it truly believed.

    • ram6968

      fiscal responsibility is a matter of paying debts you’ve already incurred, yet the republicans are threatening to force the gov’t to default on those very debts….doesn’t sound very fiscally responsible to me

  • NRA Liberal

    “…The libertarians I know, including the now famous libertarian videographer John Papola, claim that true libertarianism would not permit any subsidies or corporate welfare as it distorts markets, fails to allow creative destruction…”

    Schumpeter claimed that monopolies and subsidized industries would be overtaken by competitors who out-innovated them regardless of market distortions. “Creative destruction” is that force which overtakes everyone, monopoly or not.

  • jerseychix

    You either believe in corporate welfare or you don’t. And the GOP clearly does, unless it is for things like solar panels and light rail, cause liberals like those programs.

    Here’s the truth, oil is fungible. If we end our subsidies, it will not affect the price of oil because it has nothing to do with consumption in say, China.

    Oil consumption is UP worldwide. American oil production, protected somewhat by these ridiculous subsidies, is not that much. Ergo, dropping the subsidies will have a negligible effect on prices. It isn’t that hard.

    Gasoline prices on the other hand (which it seems no one understands is not the same as the price of a barrel of oil) are affected by a whole host of regional and state policies, plus supply of oil. Our gas prices are much more affected by the rate of refining, and the rate of building/reinvesting in those refineries, and state taxes. Frankly, our refinery infrastructure sucks because refineries have no competition. They have no reason to increase efficiencies or output because, what competes with gas? Nothing. For a system that loooooooooooooooves the free market so much, our government (both Dems and GOP) has quite effectively squashed all free market activity in the internal combustion engine market by subsidizing the production of oil, the car market, and the general idea that anything less that a two car household is unAmerican.

  • TerryF98

    High oil prices are just another way to transfer wealth upward.

    Exxon’s 69% rise in profits, on top of already very good profit levels have come out of the pockets of ordinary Americans. That 69% rise in profits proves that the problem does not in whole belong in the cost of oil out of the ground.

    So Exxon and other oil companies are making huge profits and that money is being distributed via dividends to the investing class. Therefore the GOP has zero interest in reducing the profit and wealth redistribution as this after all is a GOP priority.

    Who owns stocks in this country, if you take out things like mutual funds it breaks down like this. “The wealthiest 1 percent of households has 38 percent, Wolff found; the wealthiest 5 percent has 69 percent; the wealthiest 10 percent has 81 percent.”

    And if you think that excess profits are going back into investment in jobs think again. Exxon has just bought back huge amounts of it’s own stock (5.7 billion and another 5 billion expected in the second quarter), it did the same in the 2007 oil price hike. That extra profit used to buy back stock does nothing but push the stock price higher (up 32% over six months)so it’s a win/win for the oil companies.

    “Big Oil spent $63 million lobbying Congress and $2 million in campaign contributions last year so politicians would hand out $4 billion every year in taxpayer-funded subsidies.”

    In 2010 the oil companies gave $321,500 to Democrats and $1,700,950 to Republicans. So no wonder the GOP has voted twice recently to keep the corporate welfare going.

    Exxon paid ZERO in taxes to the IRS in 2009 (last year for records) they shelter all taxes in tax havens and offset USA taxes against taxes paid overseas. The 77 billion in taxes for 2009 that were paid in the USA were taxes like sales tax which are consumer taxes passed onto state and central government.

    Giving oil companies a $4 billion dollar welfare check when they are making record profits and paying zero tax is a disgrace.

    Your Government is part owned by the oil industry.

  • TerryF98

    Follow the money…..

  • indy

    Well, Terry is right, nobody seems interested in election reform and it is an issue that remains at the bottom of everybody’s list, Democrat or Republican. So long as corporations primarily fund the political infrastructure, corporate welfare won’t go away. You are howling at the wind.

  • balconesfault

    To break an addiction, you need to first acknowledge that the addiction is harmful.

    Chances of the leadership of the GOP accepting that premise = 0.

  • Russnet

    That is the most asinine headline I’ve ever read in my life. Back to WSJ.

    • TerryF98

      Yep, stay in the world of lies and unreality. Don’t let the door….

      • Russnet

        Terry, you’re a bug, and I’m a can of bug spray. Can we get along?

        • TerryF98

          They make the tops of bug spray idiot proof, so you have zero chance!

          Back so soon, you never gave us a chance to miss you already! I guess even the News Corpse WSJ was too factual for you.

          I see that you have zero response to the facts presented in my 7.59 post.

  • sweatyb

    The one addendum I would add is that, by all appearances, both the DNC and the GOP share the same addiction to corporate welfare.

    The problem for the GOP is their policy stance of “We’re against whatever Obama’s for” is quite awkward.

    It would be interesting if Boehner and the GOP could break away from their corporate overlords and flip on corporate subsidies. If they could do that, they could re-brand as THE party that championed the individual over the state AND corporation. The Republican platform could morph into: the purpose of the state is to uplift individual Americans.

    Certainly they have the philosophical framework in place already (with all the talk about individual liberty and personal responsibility and such). Corporate America is almost as despised as Congress, so easy to make another bogeyman there. And they could actually, you know, run for government office on a platform that wouldn’t necessitate complete philosophical bankruptcy.

    I mean, it’s never going to happen, but that’s where the ideological vacuum lies. The Democrats and the Republicans are both corporatist. They both worship at the alter of the S&P 500. Currently, the Republican party is content to be an undefined morass of gibberish, paranoia, and venal greed.

    But that is a recipe for long-term second-place, minority-party status.

  • Hunter01

    Who, exactly, is helped by cutting oil industry subsidies? Not the GOP. Politically, conservatives benefit from the fiscal crisis, and we should not take any steps to end it. To the contrary, the GOP needs to drive the economy right over the cliff while Obama occupies the WH. More pain, more gain. (BTW, Palin gets this.) Remember: we are the masters of the blame game; the Dems have no clue how to play. The goal, the only goal, is to take back the WH and all the spoils.

  • Chris Balsz

    If cheaper fuel is a “special interest” then who is not part of the cabal?

  • tom78212

    So who’s making the money? Tell me this – what was the price of gas, say 2000-2003? This is when Cheney was in charge and meeting with the heads of the big oil companies – in secret. No need to tell “the people” what conspiracies were being concocted. Then the invasion to “protect the oil wells” (I know.. it was WMD but we know it was really to get control of the oil). Okay that “went well.” Prices went up… way up. Halliburton et al made a lot of money. Now, the US gets about half its oil from Canada. And we produce a bit. So, in reality – how much do we REALLY depend upon the ME for oil? There are other sources, ya know. And now again – oh dear – trouble in the ME… but production hasn’t been threatened. And prices are going up again. Why? Obfuscate the realities. Cheney and his cronies and other big biz money types are again profiting from a false crisis. Why doesn’t our government – our president – and the suits in DC – tell the truth. Do we really need yet another Michael Moore expose movie telling us what we already know? They’re all in on it – and we get to spin our wheels over crap like birth certificates and debt ceilings and medicare smoke screens.

    • Hunter01

      No, there are not “all in on it.” It’s our game; the Dems are out in the cold. Republicans profit and Democrats pay the political price. Divine Plan.

  • Churl

    The GOP will break its addiction to oil when the rest of us do. You know, when our groceries are delivered to our local markets in oxcarts and in colorful baskets carried by donkeys. When said groceries are produced on farms powered by horses. When we can all earn our livings at home or at places within walking distance. When we use sedan chairs and rickshaws instead of taxi cabs and buses. When we get rid of the crossover van and load the family in a Conestoga wagon behind a team of Percherons to visit relatives in another state.

    • jakester

      Glad to see you are full of great ideas Churl. There are lots of things we can do to make things way more efficient and use more alternate energy than your phony luddite scenario.

      • Churl

        Are there indeed “lots of things we can do”? I’ve seen quite a few of “things” over the years, but few of them ever seem to work out absent subsidies and coercion.

        One of the things that would help fuel economy is domestic auto manufacturers adopting and promoting European-style turbo-diesel engines in their automobiles. Instead of that, Government Motors offers us the Volt.

        • jakester

          Since GM is only a small segment of the over all market in US auto sales, blame that on lack of demand and childish need of so many fat lazy low brows for huge vehicles, which is 90% ego driven. Why do you think people are so fat? Go to McDonalds and see all the yahoos idling in line with their over sized blubber mobiles when if they just parked, turned off the motor, and walked 50′, they would have their crappy food in half the time. I see people idling in a parking space for 30 minutes in 67F weather just to run their heat/ac, how utterly contemptible. Is this the America you want to promote? Maybe if we all decided to walk or ride a bicycle an extra 5 miles a week, we would save some gas and lose some weight. We also might cut down on some pollution. But the stock refrain from your left end of bell curve, is that “we’re environmentalists, just not whackos!” as you drive a 5500 lb vehicle 2 blocks to get into the drive through at Dunkin Donuts. Try brewing your own cup at home and save all around!

  • Chris Balsz

    Maybe you guys haven’t noticed, but trying to force us off petroleum by clamping down on domestic production isn’t helping the economy at all.

    • TerryF98

      Please detail this clamping down and give us the USA production figures for the last 5 years.

      I will save you the trouble.

      • TerryF98

        Sure does not look like a clamp down to me, sure looks like an expansion over the last couple of years. Funny how your fact free preconceptions are totally and completely incorrect.

        Facts are a bitch!

        In fact oil production since Obama took office has increased for the first time in 30 years!

  • balconesfault

    Are there indeed “lots of things we can do”? I’ve seen quite a few of “things” over the years, but few of them ever seem to work out absent subsidies and coercion.

    Let’s be honest. Our current oil based economy is being subsidized by resource extraction. If you factored into the value of oil and gas their value to future generations, it would be far higher than simply the extraction price. One day the oil and gas will run out. We’re consuming our grandchildren’s resources, same as we’re building debt for them to pay off.

    • Churl

      Well, yes.

      The questions to be answered are: (1) what energy forms can realistically replace fossil fuels,
      (2) what is the best way to phase in these sources, (3) over what time period and (4) who gets to decide?

  • Chris Balsz

    “Facts are a bitch!

    In fact oil production since Obama took office has increased for the first time in 30 years!”

    Looking for that graph now.

    To your mind this justifies barring new drilling in the Gulf and playing games with ANWR? I think we can use all the oil we can get.

    • TerryF98

      “To your mind this justifies barring new drilling in the Gulf and playing games with ANWR? I think we can use all the oil we can get.”

      Did I say that? No I did not. You seem to say things without thinking! If it was supposed to be a question then ask a question don’t make a statement.

      There is no justification for not drilling the gulf as long as the OIL companies are following regulations and not doing what BP and Haliburton were doing which is cutting corners for the sake of profit.That is the administration’s position as well though you probably do not know that. I am guessing the increase in oil production (back to 2002 levels) is actually coming from deep water wells in the gulf.

      ANWR is a wildlife refuge, let it be. Maybe some day when we are desperate your grandchildren will need that oil. There is such a thing as vital energy source conservation. If we drill ANWR at this stage the chances of that oil ending up outside the USA is very high anyway, so what is the point? You may not know but the oil market is a global one, increasing USA production does not necessarily mean more of that oil will be sold into the USA marketplace.

      In the mean time let’s use what we have wisely instead of burning it like fools in vehicles that get 12 MPG.

      By the way when I go to the gas station I do not have to Que for gas, I don’t have to get a ration card. I can buy as much as I like. Where is the shortage of gas?

  • TerryF98

    For those interested.

  • jakester

    Walk, ride a bike, skateboard, but stop driving your cars everywhere!

  • greg_barton

    Hey, Churl, why don’t we just have an electricity based transportation infrastructure backed by nuclear power generation?

    But if you have a thing for oxen…whatever floats yer boat, man.

    • Churl

      We don’t have an electricity based transportation infrastructure backed by nuclear power generation (and I expect you don’t know this since it started before the Jon Stewart Show)


      construction of new nuclear power plants has been blocked by environmental pressure groups for the better part of 40 years.

      No power plants, you see, means no backing up of an electrically based transportation system.

  • nhthinker

    —Consumption of Oil (Kbbl/day) ——–
    year….US……World…percent of world
    ………..17.08%…40.57% —-> comparision of percent increase since 1981 US and World
    data from:

    The world oil consumption is way up. The US is down in the past 10 years.
    In 1981, US was 27% of oil consumption and is already down to 22%

    Subtracting 100 percent of US use and the world oil use would have still gone up and so would the price.

  • greg_barton

    Churl, construction of new nuke plants has also been blocked by intentional neglect from conservatives in the pocket of the fossil fuel industry. They just let environmental groups do the dirty work.

    • jakester

      What is happening in Japan isn’t causing the phone to ring off the hook for new reactor orders.

    • nhthinker

      You are blaming conservatives for not spending political capital to get more nuclear power:
      why aren’t you blaming liberals and moderates for not spending political capital to get more nuclear power?

      Are you suggesting the conservatives have more responsibility for getting to coal and CO2 independence than other factions of the political spectrum?

      Your reasoning seems quite warped.

      • balconesfault

        You are blaming conservatives for not spending political capital to get more nuclear power: why aren’t you blaming liberals and moderates for not spending political capital to get more nuclear power?

        By and large liberals oppose new nuke projects because of issues related to safety, waste disposal, and in much of the country, water consumption. By and large these liberals favor increased energy conservation as a way of bridging from today to a future where various renewables (wind, solar, tidal, geothermal, biofuels) provide a sustainable energy supply for America without investment in big nukes.

        A lot of moderates oppose new nuke projects because they are tremendously expensive, and the free market has already signaled that they will not build them without enormous taxpayer subsidies, particularly because rapid growth in wind and solar threatens to strand big nuke investments within the lifespan of any plants we’d start building today.

        • nhthinker

          You didn’t answer the question and you also weren’t the person that characterized “neglect”.

        • nhthinker

          I love the Rachel Maddow commercial of “Lean Forward” in front of the Hoover Dam.

          Exactly how many Hoover Dams would we have if the treehugging lawyers of the left, that are now a critical plank of the Democrats, were around 100 years ago?


          The commercial is the ultimate in propaganda.