[Congressional Record Volume 157, Number 65 (Thursday, May 12, 2011)]
[Senate]
[Pages S2901-S2903]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
OIL SUBSIDIES
Mr. DURBIN. Mr. President, an issue is going to come up next week
which is very important for every American family and business; that
is, the issue of gasoline prices. I have been across my State, and as I
mentioned on the floor earlier, my expert on gasoline prices is my
wife. When I speak to her in the morning in Springfield, IL, she will
tell me the latest in gasoline prices. Last week, it was $4.20 a
gallon. I don't know what it is this week. But what she asks me is--as
everyone in Illinois must ask--what are you going to do about it?
It turns out we are going to do something. It may not have a direct
impact on gas prices, but it certainly has a direct impact on our
policy toward oil companies. You see, American families are being
clobbered three times by high prices at gasoline stations: first, at
the pump; second, when we give $4 billion in subsidies every year in
the Tax Code to oil companies; and third, when we have to borrow the
money from China to give to these oil companies and we end up paying
interest to China--ourselves, our children, and our grandchildren.
Paying three times for outrageous gasoline prices is an outrage
itself. The big oil companies have made almost $1 trillion in profits
over the last 10 years--over $35 billion in the first 3 months of this
year. Some of these oil companies are breaking records on Wall Street
for corporate profits. The Wall Street Journal also reported last week
that the CEOs of oil and gas companies who are appearing before the
Senate Finance Committee today had the highest median compensation--at
$13.7 million annually in 2010, up 17.3 percent from the year before.
In addition to the profits, the oil industry receives over $4 billion
in tax giveaways each year. Instead of using that money to lower prices
at the pump, these giveaways have merely been used to pad the profits
and the compensation of the oil companies and their executives.
Yesterday, Senator Menendez introduced a bill, which I am cosponsoring,
to end the special treatment of tax breaks given to the five largest
oil companies in America. This would save Americans over $4 billion a
year, and it is our goal to use that money to reduce our Nation's
deficit.
Americans across the board agree it is time to end this corporate
welfare for the big oil companies. In a recent poll, three out of four
Americans support eliminating tax credits for the oil and gas
industries to reduce the Federal deficit. We have to deal with our
deficit that is growing at an unsustainable rate, and I am hoping this
will be a commonsense, good-faith, bipartisan agreement to end these
subsidies. We can take the taxpayer dollars flowing to the oil
companies and give them, instead, to those who are dealing with our
deficit to reduce it.
Incidentally, we are not talking about business expenses at these oil
companies, which is what many of these executives would like to have
people think. These are subsidies used to increase profits and reduce
their tax burden. Last year, Exxon had an effective tax rate on its
U.S. income of 16 percent--less than half the corporate tax rate.
According to the Congressional Budget Office, the average American has
an effective tax rate of over 20 percent. So Exxon was actually paying
a lower tax rate on their profits than the average American pays on
their income.
In addition, the big five oil companies have used 71 percent of their
profits not for exploration and production, which is what they would
like you to think, but rather for boosting share prices. Actually, they
used only 12 percent of their prices for exploration and new
development. In other words, these oil companies spend almost six times
as much on dividends and stock buybacks as they do in looking for new
sources of oil. The primary use of these subsidies is not to discover
new oil, it is to discover new record-breaking profits.
It is time for government handouts to these extremely profitable,
well-established companies to come to an end. Ending them will not
raise gas prices, as some Republicans have argued. We are dealing with
a world market for oil. The price is set by the global market. Gasoline
prices have risen significantly, even with these subsidies in
place. Removing them will not change these prices.
The Congressional Research Service has said the effects of removing
the subsidies would be very small. According to the Department of the
Treasury, removing them would cause the loss of less than one-tenth of
1 percent of the global oil supply and have little or no impact on
prices in the United States.
In addition, removing oil subsidies reduces U.S. oil production by
less than one-half of 1 percent, and it will increase exploration and
production costs by less than 2 percent for companies that are making
record-breaking profits.
[[Page S2902]]
Removing these subsidies will not affect the price of gasoline, nor
will increasing our domestic production. That is the other thing.
Remember the chant ``drill baby drill''? It was all over the place
during the last Presidential campaign. In fact, domestic oil production
in 2010 was at the highest it has been in 7 years. Even with production
strongly increasing, oil prices keep going up, and so do gas prices.
Keep in mind, the United States has less than 2 percent of the
world's proven oil reserves and every year we use 25 percent of the
world's oil production. Even though we have increased production, we
still see prices going up. Our fuel price would not be altered by
increased drillings. We would still need to import over 50 percent of
our oil.
As has been said many times: We can't drill ourselves out of this
problem. We simply don't have enough oil. The only way to end our
dependence and insulate ourselves from high gas prices is to finally
develop for America a national energy policy. Other countries have one.
We don't. We need a sound, comprehensive policy that includes plans for
energy efficiency and new renewable sources. Increased drilling is not
going to significantly reduce gas prices.
Actually, Congress has taken another step to help consumers bring
prices under control at the gas pumps. Last year, Congress voted to
reform the swipe fee that big banks get paid from merchants on debit
card transactions. So every time you fill the tank and swipe your debit
card, you are paying, on average, 40 cents or more to the bank for the
swiping of that card. What we have done is to say the Federal Reserve
should establish a reasonable and proportional level for that fee. They
think it should be much less than 40 cents.
The big banks and credit card companies are screaming bloody murder.
The notion that the gas company, the convenience store, the retailer,
the restaurant, the hotel would not have to pay these high swipe fees
means a loss in profits to the big banks. But what it means to
consumers is more competition in price and lower prices. As long as you
have a competitive market--one gas station across the street from
another--when you reduce the cost to the owner of the gas station, you
are more likely to see a reduction in the prices charged to consumers.
I received a letter on Tuesday from 52 national, regional, and State
trade associations representing virtually all the gas retailers in
America. They made it clear swipe fees inflate gasoline prices and that
because the gas retailing industry is extremely competitive, lower
swipe fees will produce savings that will be passed on to consumers.
The big banks and credit card companies are trying to stop this
reform. You can understand that. These credit card companies and big
banks make over $1 billion a month on what they charge for our using a
debit card. If you bring it down to an actual reasonable and
proportional cost, they will make less, merchants will get more, and
consumers will pay less.
There is a movement to try to delay this for a so-called study of 30
months. I did the calculation. Thirty months times the profits the big
banks and credit card companies will take out of the existing swipe fee
comes to about $40 billion that is going to be taken out of the
American economy if we agree to a 2\1/2\- or 3-year delay of this. That
is not fair to consumers, it doesn't help the economy, and it doesn't
help bring down gasoline prices.
American families can't afford to continue paying for high gasoline
prices at the pump, in subsidies to oil companies, and in interest paid
on money borrowed from other governments to help us pay these
subsidies. It is time to end these handouts to the big profitable oil
companies. It is time to rein in the swipe fee that is benefitting the
biggest banks in America as well as the credit card companies. It is
time to finally focus on families and consumers across America who have
a challenge today because of this increase in cost.
Mr. President, I ask unanimous consent to have printed in the Record
a letter dated May 10, 2011.
There being no objection, the material was ordered to be printed in
the Record, as follows:
May 10, 2011.
Hon. Richard Durbin,
Majority Whip, U.S. Senate,
Washington, DC.
Dear Senator Durbin: Our associations represent virtually
every part of the retail industry selling motor fuels in the
United States. Like many Americans, we are concerned about
the price of gasoline today. Not only are rising prices bad
for our customers, but when the price of gasoline rises,
retailers make less money. That might not make sense at first
glance, but the retail sale of gasoline is extremely price
competitive. Retailers put their prices on large signs that
motorists can see as they drive. Studies have shown that
customers will drive out of their way just to save one or two
cents per gallon. As a result, when the wholesale price of
gasoline rises, retailers cannot raise prices to consumers
fast enough to keep pace.
This is one of the many reasons why the swipe fees paid by
our industry are so offensive. Swipe fees are fixed centrally
by the credit card giants for both debit and credit cards as
a fixed fee plus a percentage of the transaction. That means
the fee retailers pay to sell gasoline goes up every time the
price of gasoline goes up. While gasoline retailers make less
money on rising prices, they pay higher and higher fees. That
simply is not fair.
With gasoline nearing $4 per gallon, debit swipe fees
average about 6 cents per gallon--and credit swipe fees are
about 8 cents per gallon. Our customers worry about every
extra penny they pay for gasoline and 6 to 8 cents extra is
far too much money. To put these huge fees in perspective,
consider that every penny per gallon change in the retail
price of gasoline costs consumers an additional $3.75 million
per day or $1.38 billion each year.
The surest and swiftest way to reduce gas prices, however,
is to let the Durbin amendment and the Federal Reserve's rule
implementing it take effect on time. Doing that will reduce
the fees gasoline retailers pay, and the EIA definitively
concluded in a 2003 report that gasoline retailers pass
through 100 percent of cost reductions in the form of lower
gasoline prices. That means lower debit swipe fees will lead
to lower gas prices.
Senator Tester's bill (S. 575) would do the opposite. It
would stop swipe fee relief for two years and keep pushing up
gas prices. That same 2003 EIA study found that cost
increases get passed along in the form of higher gas prices.
Therefore, a vote for S. 575 is a vote for two years of
higher gas prices than anyone should be paying.
There are many reasons why reform is needed now to limit
the price-fixing by credit card giants and banks on debit
swipe fees. While some of those reasons might be subject to
debate, it is hard for any of us in the business of gasoline
retailing to understand why--given the pricing pressures we
and our customers all face today--any Senator would vote for
two years of higher gas prices when some relief is only a
couple of months away. We urge you in the strongest terms to
vote against S. 575, a bill that will keep gas prices too
high.
Sincerely,
NACS--National Association of Convenience Stores; NATSO--
National Association of Truck Stop Operators; PMAA--
Petroleum Marketers Association of America; IGMA--
Society of Independent Gasoline Marketers of America;
P&CMA--Petroleum & Convenience Marketers of Alabama;
APMA--Arizona Petroleum Marketers Association; AOMA--
Arkansas Oil Marketers Association, Inc.; CIOMA--
California Independent Oil Marketers Association;
CWPMA--Colorado Petroleum Marketers and Convenience
Store Association; ICPA--Independent Connecticut
Petroleum Association FPMA--Florida Petroleum Marketers
& Convenience Store Association, Inc.; GOA--Georgia
Oilmen's Association; HPMA--Hawaii Petroleum Marketers
Association; IPM&CSA--Idaho Petroleum Marketers and
Convenience Store Association; IPMA/IACS--Illinois
Petroleum Marketers Association/Illinois Association of
Convenience Stores; IPCA--Indiana Petroleum Marketers
and Convenience Store Association, Inc.; PMCI--
Petroleum Marketers & Convenience Stores of Iowa;
PMCA--Petroleum Marketers and Convenience Store
Association of Kansas; KPMA--Kentucky Petroleum
Marketers Association; LOMACS--Louisiana Oil Marketers
and Convenience Store Association; MODA--Maine Energy
Marketers Association; MPAMACS--Michigan Petroleum
Association/Michigan Association of Convenience Stores;
MAPDA--Mid-Atlantic Petroleum Distributors'
Association; MPM--Minnesota Petroleum Marketers
Association; MPMCSA--Mississippi Petroleum Marketers &
Convenience Stores Association; MPCA--Missouri
Petroleum Marketers and Convenience Store Association;
MPMCSA--Montana Petroleum Marketers and Convenience
Store Association; NCPA--Nebraska Petroleum Marketers &
Convenience Store Association; NPM&CSA--Nevada
Petroleum Marketers & Convenience Store Association;
NEFI--New England Fuel Institute; IOMANE--Independent
Oil Marketers Association of New England; FMANJ--Fuel
Merchants Association of New Jersey; NMPMA--New Mexico
Petroleum Marketers Association;
[[Page S2903]]
ESPA--Empire State Petroleum Association, Inc. (NY);
NCPCM--North Carolina Petroleum & Convenience
Marketers; NDPMA--North Dakota Petroleum Marketers
Association; OPMCA--Ohio Petroleum Marketers &
Convenience Store Association; OPMCA--Oklahoma
Petroleum Marketers & Convenience Store Association;
OPA--Oregon Petroleum Association; PPMCSA--Pennsylvania
Petroleum Marketers & Convenience Store Association;
SCPMA--South Carolina Petroleum Marketers Association;
SDPPMA--South Dakota Petroleum and Propane Marketers
Association; TFCA--Tennessee Fuel & Convenience Store
Association; TPCA--Texas Petroleum Marketers and
Convenience Store Association; UPMRA--Utah Petroleum
Marketers and Retailers Association; VFDA--Vermont Fuel
Dealers Association; VPCGA--Virginia Petroleum,
Convenience and Grocery Association; WOMA--Washington
Oil Marketers Association/Pacific Northwest Oil Heat
Council; WPMA--Western Petroleum Marketers Association;
OMEGA--West Virginia Oil Marketers and Grocers
Association; WPMCA--Wisconsin Petroleum Marketers &
Convenience Store Association; CWPMA--Wyoming Petroleum
Marketers and Convenience Store Association.
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