[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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