Democrats come up with new legislation that can end the wasteful subsidies for Big Oil

At the same time when Republicans are ready for making some really deep cuts to reduce the overall budget deficit, Democrats have started to direct attention to the billions of dollars that are involved in tax breaks offered to the various nationwide gas and oil companies.

On February 10th the “Ending Big Oil Tax Subsidies Act” was introduced by 7 Democrats who are currently active in the US House of Representatives. The bill has been designed to cut close to $40 billion in various subsidies offered to the so-called Big-Oil companies over the upcoming 5 years.

One of the representatives behind the bill said that the biggest oil and gas companies do not have to rely on nearly a century old subsidies to sell $100 dollar-per-barrel oil so as to make close to $100 billion in profits every year. He also pointed out that middle-class families should not be made to suffer so that the big oil and gas development corporations have to be given tax breaks. The bill’s introduction was done in the House less than two weeks since President Barack Obama’s address to the nation. In his speech, the President said that the US should eliminate the various subsidies offered to the oil companies. He also said that the country’s focus should instead be on making an investment in futuristic energy sources.

House Appropriations Committee Chairman Hal Rogers, R-KY, announced on February 10th that $100 billion in spending would be cut to meet the Republican “Pledge to America.” Further details on specific cuts and funding levels will be available when the legislation is introduced. “Our intent is to make deep but manageable cuts in nearly every area of government, leaving no stone unturned and allowing no agency or program to be held sacred,” he said.

However, the Democrats haven’t found favor with the Republicans over this particular bill. The fact remains that if the legislation is passed and tax breaks are still offered to the various oil companies, the threatened cuts would not make too much of a difference for the likes of the big names like BP, Chevron and Exxon. Oil companies have declared nearly $77 billion in profits this past year.

The Democrats are of the opinion that jobs should be created for the American people, and new training programs started in an effort to lay down the foundation for global competitiveness that will help in the long run.

Most of these tax breaks and subsidies for oil were issued at a time when the price of oil was lower than $30 a barrel. It was a turbulent time when the domestic oil producers were facing fierce competition with foreign industries. Today, however, the situation has changed drastically. Today, oil sells for a price which is close to 3 times the original price when the subsidy was begun. This makes such a bill necessary at this point of time.

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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