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Energy / energy

GOP in Awkward Spot on Oil Tax Breaks

House Speaker John Boehner’s initial comments that oil companies should “pay their fair share” have put Republicans on the defensive on an issue where they usually have the upper hand.(Jonathan Ernst/Getty Images)

photo of Coral Davenport
April 27, 2011

The political firestorm over gasoline prices illustrates an increasingly difficult question for Republicans: How do they defend billions in tax breaks for oil companies—even as they aggressively slash spending in nearly every other quarter of the budget? 

House Speaker John Boehner, R-Ohio, spotlighted that awkward question this week when, pressed in an ABC News interview, he said he was open to considering ending some of the oil tax breaks and that the companies should “pay their fair share.”

In fact, Republicans have long opposed President Obama’s call to roll back the $4 billion in tax breaks enjoyed annually by the oil industry, and Republicans frantically tried to scramble away from the remarks. Privately, Republican aides complained Boehner was painted into a corner by a question that rhetorically set up the tax breaks as indefensible.

 

Democrats leapt on the remarks, hailing Boehner’s willingness to work with them on one of President Obama’s signature issues.

In the debate over high gasoline prices, Democrats have repeatedly sought to tie Republicans to big oil companies, a tactic that could spur voter ire as gasoline prices surge above $4 a gallon in many states.

The Democratic National Committee launched an e-mail and Twitter campaign on Wednesday urging voters to contact Boehner’s office and “ask him to make it clear if he stands with the energy companies or with the American people on this issue.”

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Boehner’s concession has put Republicans on the defensive on an issue—high gas prices—in which they usually have the upper hand. Traditionally, Republicans have succeeded in harnessing the high gas price issue to hammer Democrats for resisting new offshore drilling. But now they find themselves on the run from their own concession that some of the big oil benefits they’ve defended may cost the government.

President Obama sent a letter to congressional leaders urging them to take up the tax breaks, and House Minority Leader Nancy Pelosi, D-Calif., wrote to Boehner, "We have had several votes on this subject in the House, and have been disappointed that these proposals have not been supported by the Republican leadership. Your comments [Monday] acknowledged that oil companies ought to be paying their fair share. It makes little sense for American consumers—who are now paying over $4 a gallon for gasoline in most parts of the United States—to have billions of their taxpayer dollars subsidizing oil companies that are making record profits."

Sen. Chuck Schumer, D-N.Y., said in a statement, "It is almost too good to be true, but gas hitting four dollars per gallon seems to have finally caused Speaker Boehner to see the light on the insanity of providing subsidies to profit-soaked big oil companies.... At a time when we have a record deficit, it makes no sense to keep rewarding oil companies for socking it to consumers at the pump."

After the onslaught of Democratic remarks hailing Boehner’s willingness to work with them, Republicans were forced to awkwardly walk back the speaker’s remarks.

“The speaker wants to increase the supply of American energy and reduce our dependence on foreign oil, and he is only interested in reforms that actually lower energy costs and create American jobs,” said Boehner spokesman Brendan Buck. “Unfortunately, what the president has suggested so far would simply raise taxes and increase the price at the pump.”

Other Republican leaders also tried to pull away from the suggestion that they would support the subsidy rollback. “If someone in the administration can show me that raising taxes on American energy production will lower gas prices and create jobs, then I will gladly discuss it. But since nobody can, and the President’s letter to Congress [Tuesday] doesn’t, this is merely an attempt to deflect from the policies of the past two years,” said Senate Minority Leader Mitch McConnell, R-Ky.

But one analyst said Boehner’s stumble could signal a first chink in the famously tight relationship between oil companies and Republicans. Unlike previous years, many of today’s congressional leaders do not hail from oil-producing states. Leaders like Boehner, from Ohio; House Majority Whip Eric Cantor, from Virginia; and McConnell, from Kentucky, are all big recipients of oil-industry campaign cash, but their home-state voters aren’t beholden to oil companies for jobs and tax revenues.

“What you’re going to have is a moment when Republicans aren’t as loyal to oil as everyone thought they would be,” said Kevin Book, an analyst at ClearView Energy Partners.

“Republicans are going to look bad if they defend big oil. And they have shown the first tangible evidence of a willingness to put some distance between themselves and the oil companies.”

The debate could further ignite as major oil companies report their first-quarter profits this week. BP reported this morning that its first-quarter profits were down, $5.4 billion from $5.6 billion a year ago, in part due to payments it has made to cover cleanup from the Gulf of Mexico spill. But analysts say that soaring oil prices could yield record or near-record profits from the  world’s four other biggest oil companies, Royal Dutch Shell, Chevron, ExxonMobil, and ConocoPhillips, are set to roll out their profit reports later this week, and analysts say the soaring oil prices of the last three months are likely to yield similarly massive profits. 

“They’re going to make lots of money even though it’s politically a bad time for them to do it,” Book said of the oil companies. “And Republicans are going to look bad if they defend Big Oil.”

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