Taxpayers Subsidize Big Oil, World’s Most Profitable Industry

by: Rinaldo Brutoco and Madeleine Austin, World Business Academy

The US Senate couldn’t muster the votes to end $2 billion a year in taxpayer subsidies for the five biggest US oil companies. The House had already voted to block efforts to repeal tax breaks for Big Oil, in sharp contrast to its vote to strip tax credits for small business health insurance.

The Congressional votes create a strong contrast between the US and other countries, including Germany, China, the Scandinavian countries, and most recently, Japan, who are leading the way to a new planetary fuel system that will replace oil and nuclear energy with renewable energy. In response to its nuclear disaster, Japan has renounced its plans to build new nuclear plants and announced it will redo its energy system “from scratch.” Germany is using the Fukushima disaster as an opportunity to curtail nuclear power and boost its strong clean technology export sector. Other countries have curtailed or suspended their nuclear plans. But the United States, once a leader in science and technology that beat other countries to the moon, remains controlled by money politics, Big Oil, and climate deniers.

The oil industry is the most profitable industry in the world. US oil companies earn about $3 billion in profits every week, yet get $4 billion in taxpayer subsidies every year. In the first quarter of 2011, Big Oil’s profits were up 38% from the first quarter of 2010.

The industry’s outsize profits didn’t stop it from squealing like a stuck pig over proposals to trim $2 billion from its annual subsidies and use the revenue to reduce the deficit by about $21 billion over 10 years.

The oil companies tried to characterize the end of their subsidies as a “tax hike,” despite growing and widespread recognition across the political spectrum that tax breaks are just another form of government spending, one of several ways to provide direct support for an industry. Before becoming Speaker, John Boehner (R-Ohio) admitted that “tax deductions, credits, and special carve-outs . . . what Washington sometimes calls tax cuts are really just poorly disguised spending programs ….”

As a recent Washington Post editorial about such “tax expenditures” pointed out, “an astonishing amount of “spending”—more than $1 trillion annually—is accomplished through the tax code, by way of tax credits or deductions. But there is little conceptual difference between billions spent to directly subsidize particular programs and billions spent indirectly in tax preferences. Either way, it’s money the government does not have, and that adds to the deficit.”

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The Senators who opposed ending the oil subsidies received 5 times more in campaign cash from the oil industry during their time in Congress than the Senators who favored ending the subsidies (on average, $370,664 versus $72,145), according to an Oil Change International and Public Campaign Action Fund analysis of data from the Center for Responsive Politics.

Who’s benefitting from the US oil industry’s taxpayer subsidies? Certainly the oil companies’ CEOs. Last year the CEO of Occidental Petroleum, the 4th largest US oil and gas company based on market capitalization, was near the top of a list of the median pay for top executives at 200 major companies. Occidental’s CEO took home $76.1 million, up 142% from the year before, despite a majority “no” vote by shareholders on his pay package.

Exxon CEO Rex Tillerson earned $21.7 million in 2009—12 times more than the $1.8 million earned last year by the CEO of the Norwegian energy company Statoil, which is 2/3 owned by the Norwegian government. Tillerson’s pay was “more than double the combined $8.3 million that Statoil paid its nine top executives in 2010.” [The comparisons are based on the most recent pay figures available.]

The average American pays a higher income tax rate than ExxonMobil, which is the most profitable Fortune 500 company for the 8th year in a row.

The Senate plans to have another go at the taxpayer subsidies later this year. Sign the Friends of the Earth petition and tell your Senators to “End the giveaway to Big Oil.” Reposted by (

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  1. And you say what about America ? See the philippine lawmakers have nothing on Washington DC. The art of big money giving more big money to its lawmakers is more well known in the USA then any other country in the world! It does not how ever always come in just white plain envelopes however. Given the so-called US surpeme court ‘s ruling allowing any one in the world to give big money to US lawmakers and those who beg to be, now it is greater then ever. So I say cheer up all you PH. Lawmakers maybe one day soon you too will catch up to your american counter parts and get a mim. wage hike also.

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