As Gas Prices Rise, Oil Company Tax Breaks Debated With gas prices mounting in recent weeks — in some states, they top $4 a gallon — the large tax breaks offered to oil and gas producers are falling under tighter scrutiny from Washington.
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As Gas Prices Rise, Oil Company Tax Breaks Debated

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As Gas Prices Rise, Oil Company Tax Breaks Debated

As Gas Prices Rise, Oil Company Tax Breaks Debated

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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Exxon Mobil said today that its profits surged during the first quarter of the year: The company said it earned $10.6 billion during that period. That's an increase of 69 percent.

The higher profits come at a time when gas prices are exceeding $4 a gallon in some states. And in Washington, there is once again talk of eliminating some of the tax breaks the industry receives.

NPR's Jim Zarroli fits it all together.

JIM ZARROLI: When gasoline prices rise, politicians begin to take aim at the oil companies, and so it goes right now. The White House has already announced plans to investigate the role that speculators play in rising energy prices. And in his weekly radio address on Saturday, President Obama went further. He said it was time to reconsider some of the tax breaks the oil industry receives each year.

President BARACK OBAMA: That's $4 billion of your money going to these companies when they're making record profits, and you're paying near-record prices at the pump. It has to stop.

ZARROLI: It may not be a surprise to hear a Democratic president talk like that. But on Monday, Republican House Speaker John Boehner took up the call as well in this interview with ABC.

Representative JOHN BOEHNER (Republican, Ohio; Speaker of the House): When the federal government is short on revenues, we need to control spending, but we need to have revenues to keep the government moving. And they ought to be paying their fair share.

ZARROLI: The Treasury Department says oil companies will get more than $40 billion in tax breaks over the next decade. They get $12 billion for deducting certain drilling costs, for instance, and another $11 billion for the so-called energy depletion allowance.

Rayola Dougher of the American Petroleum Institute says these tax breaks go to support an industry that employs nine million Americans and is leading the search for new energy supplies.

Ms. RAYOLA DOUGHER (American Petroleum Institute): As an industry, we really want to grow the tax base. We want to grow the jobs, and we want to grow the energy we're bringing in. And this would erode the ability to do that.

ZARROLI: Dougher says politicians may think that by eliminating these tax breaks, they're going after big, profitable oil companies. But she says the ones that would actually be hurt the most are small oil and gas producers that don't always have a lot of capital to stay in business.

Ms. DOUGHER: Some of the provisions they're going after would affect them the most, the soonest. And then it would ripple through the rest of the industry, of course. You just would absolutely end up with less to be able to invest. There's no way around that fact.

ZARROLI: But oil industry analyst Philip Verleger, who teaches at the University of Calgary, is skeptical of that argument. He says the incentives in the energy business are strong, and he believes small- and medium-sized companies can thrive even without the tax breaks they receive.

Mr. PHILIP VERLEGER (University of Calgary): You know, I can think of several new energy companies that have grown over the past 30 years, and all of them would've done fine. They wouldn't have made quite as much money, and their stock prices wouldn't have been quite as high had these tax benefits not been there.

ZARROLI: Verleger says when you consider how strapped the government is right now, it makes a lot of sense to go after the industry's tax breaks. Still, he says some of these breaks stretch back to World War II, and the industry has always managed to fend off efforts to eliminate them. Whether it can do so again will depend, in large part, on how much higher gasoline prices climb.

Jim Zarroli, NPR News, New York.

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