Last year, President Barack Obama called for a reduction of $4 billion from the annual subsidies the United States provides oil companies. Just as a comparison, the effective tax rate for practically every type of corporate asset is 26.2 percent. Thanks to the government subsidies, oil interests pay an effective annual tax rate of 9.2 percent. This is at the same time Big Oil (Exxon Mobil, Shell, BP, Chevron and ConocoPhillips) posted profits of $19.5 billion total during the last quarter — not the last year. And this figure represents a downturn.
Not only that, but Big Oil gets its product from public land. Yet even as it reaps huge profits by exploiting public property, the royalties it pays to the federal government for this privilege has not changed in almost 100 years. The rate has stood at 12.5 percent for a century, a number that was set to help a newly born industry get off the ground. Today, the money brought in by Big Oil could let us raise the royalty rate to 50 percent without the industry even noticing the difference.
It makes no sense that we are still providing oil companies with billions in subsidies while they post massive profits. According to the Treasury Department, removing those subsidies would mean a drop in worldwide oil production by less than 0.1 percent. Yet at the same time, cutting those subsidies as proposed by the president would mean our revenues would go up by $30.6 billion over six years. That is in addition to the $4 billion we would not be handing out to oil companies any longer.