Friday, February 24, 2012


Believer Fever

Jack Gerard, API
“What we’ve learned is that the
public probably doesn’t
understand or appreciate us
as much as we’d like them to.”
 ~ Jack Gerard is the head of the American Petroleum Institute (API), the lobbying group and voluble mouthpiece for Big Oil. He is never at a loss for words, and is relentlessly consistent with a message of how oil is simply wonderful, how lucky we all are to have an oil industry, and how unfairly put upon his industry is.

According to Gerard, the industry is also precariously perched; the slightest diminution in subsidies or the merest restriction in their freedom to operate would spell utter doom for oil production, jobs, government tax revenues, and indeed, the entire American economy. To hear him tell it, Big Oil is just one tax hike, subsidy reduction, delayed permit or tightened regulation away from catastrophe.

Slippery as oil, and completely untrue.

Last year, the top five oil companies had $137B in net earnings, an all-time record. They also received the lion's share of total oil industry incentives and tax subsidies of as much as $40B. What would have happened without that handout? What if the top five had earned "only" $97B? Would the lack of incentives have made them pack up their drilling rigs and quit? Would they have stopped exploring? Stopped hiring? Stopped producing products for which modern economies have a nearly inelastic demand?

In a normal business, if profits get smaller, the business works harder to cut costs, to improve value to their customers, to innovate... to find new initiatives that restore profits and increase their competitive position. Apparently oil is different: apparently, if government were to reduce their profits by cutting their corporate welfare, they wouldn't work harder, they would sulk. They would take their rigs and go home (or go overseas where they are better understood or something.)

What kind of American companies or Americans are they? We are told, especially by some of the current GOP presidential candidates, as well as the GOP Congressional leadership, that things such as unemployment benefits and food stamps enable laziness. If we give people handouts, the argument goes, they have no incentive to work. Cut those payments, on the other hand, and we spur them to get off their asses, to be more productive, to work harder, pay more taxes, and thus to contribute more to the American economy.

Strangely, when it comes to corporate welfare, particularly in the oil patch, the argument is turned on its head. Cut payments and they lose all incentive. Make their lives more cushy, give them more socialized money, and by golly they'll work harder and contribute more!

So when Gerard hears that President Obama has again suggested that Big Oil, awash in billions of dollars in profits, does not need all the taxpayer subsidies, he responds defensively, calling such an idea "discriminatory" and claiming that it would cost his industry $85B. (How big are those subsidies again?) If by discrimination he means cutting off payments to welfare recipients who don't need them, then, yes, I think most taxpayers are all in favor.

He really gets going, however, when he starts whining that such a reduction is unfairly "picking winners and losers." Oh really? Let's look at the picking. Oil and gas annual subsidies: $40B (or is it $85B?). Renewable energy technologies: $8B. Oil and gas: permanent subsidies that never expire. Renewables: allowed to expire every few years, devastating companies, provoking layoffs and destroying supply chains. Policies always pick winners and losers, and for more than 100 years the overwhelming winners have been oil and gas.

Gerard also complains that Big Oil has no subsidies or incentives specific to them, but that instead they share in general tax preferences, like R&D credits, depreciation and so on. Ha ha.
Brian Siu, a policy analyst for the Natural Resources Defense Council, said he found it odd that API says its industry doesn’t benefit from subsidies.

“If you looked at the tax code, you’d see very specific examples of oil and gas subsidies,” he said. “All the administration is trying to do is bring some of the oil tax treatments into alignment with the rest of the tax code.” In one example, Siu said, oil and gas companies are permitted to count royalty payments to foreign governments as a tax and can get a tax credit.
He said another subsidy aimed at the industry — one that allows oil companies to deduct intangible drilling costs — has been on the books since 1916.
Gerard is a well-paid shill, and dissembling is what he gets paid to do. His statements are not truthful, but nakedly self-serving. What he claims will not help anyone but those who pay him, and his policy prescriptions will simply make our economy sicker.

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