Oil and Tax Subsidies
Monday, April 14th, 2008
Wouldn’t it be great if every company in the automotive aftermarket could double the price of their products and services without an increase in fixed costs and still have endless customers clamoring for products? What if on top of that, the U.S. government kicked all of our businesses billions of dollars in tax breaks to figure out ways to make and sell more automotive parts, accessories and services?
That is exactly where big oil is currently. With capitalism governing the price of a barrel of oil, there may be little we can do about the price we pay at the pump. Some people complain that the government should do more to lower the price but I am not sure if that is even possible because there are other countries in line to buy that oil for the inflated prices if the U.S. doesn’t.
Another thing to consider is just two weeks ago, the Associated Press reported that there are gasoline shortages in China and when oil companies offer oil for sale, that oil is going to go to the highest bidder. Sadly, if China is willing to pay $110 a barrel, then unless we are willing to do the same, the oil goes to China. The last thing we need are oil shortages like we saw in the 80s.
I guess the government could lower taxes tagged on gasoline but that would come at the expense of the quality of our bridges and roads. In the last year, we’ve seen news reports that the nation’s bridges are in a terrible state of disrepair, so that doesn’t seem a viable option.
The oil-producing companies have learned that they can produce the same amount of product despite increased demand from developing countries and get paid far more for the same amount of effort they have historically produced. Realistically, they call this working smarter instead of harder. We would do the same if we could, but that doesn’t mean we have to like it. It appears high gasoline is here to stay.
The real grind is the $18 million in tax breaks oil companies currently enjoy. Senior executives from five of the major oil companies went before a congressional committee last week to explain why they still need these tax breaks. Exxon Mobil Corp., Shell Oil Co., BP America Inc., Chevron Corp. and ConocoPhillips, will testify. The Associated Press reports these companies earned a total of $123 billion last year from soaring oil and gasoline prices. Do they really need those tax breaks?
The House of Representatives has approved legislation two times in the last year to end the tax breaks. The revenue was supposed to instead go to booster renewable fuels, wind and solar power. Unfortunately, neither of the House initiatives passed the senate.
I wonder if the tax breaks are taken away, will the oil companies merely pass this additional cost on to consumers driving prices up even higher. The saying, “nothing comes for free” comes to mind.