Obama reiterates call for end to oil subsidies

By Kris Bevill | April 27, 2011

President Barack Obama issued a letter to congressional leaders April 26 urging them to immediately eliminate subsidies for the oil industry, stating that the more than $4 billion spent annually to provide tax incentives to oil companies should be used instead to make investments in clean energy. “While there is no silver bullet to address rising gas prices in the short term, there are steps we can take to ensure the American people don’t fall victim to skyrocketing gas prices over the long term,” he wrote. “As we work together to reduce our deficits, we simply can’t afford these wasteful subsidies, and that is why I proposed to eliminate them in my FY11 and FY12 budgets.”

The president then urged congressional members to begin work immediately on a long-term energy strategy. His proposal, the Blueprint for a Secure Energy Future, addresses multiple sources of domestic energy, including continued support for biofuels, with an emphasis on next-generation biofuels, support for biofuels infrastructure expansion and the reform of ethanol subsidies.  Obama admitted in the letter that he expects disagreement among legislators over some of the measures introduced in his proposal, but he is confident that an energy policy can be achieved. “And I hope we can all agree that, instead of continuing to subsidize yesterday’s energy sources, we need to invest in tomorrow’s,” he stated in the letter. “We need to invest in the 21st century clean energy economy that will keep America competitive. In the long term, that’s the answer.”

Democratic legislators immediately responded in support of eliminating the oil subsidies. Sen. Chuck Schumer, D-N.Y., said “it makes no sense” to continue offering financial support to the oil industry. “These subsidies are a relic of a time when oil was $17 per barrel and oil companies needed incentives to drill,” he said in a statement. “That time has long since ended.” Senate Majority Leader Harry Reid applauded the president for calling for an end to oil subsidies and urged Senate Republicans not to filibuster efforts to eliminate them. “Rather than giving handouts to big corporations, we should be investing in clean energy development and construction here at home to create jobs, diversify our economy, break our dangerous dependence on oil and make our nation safe.”

The ethanol industry has been calling for the elimination of oil subsidies for some time, stating that removing those incentives would be a step toward leveling the playing field for alternative transportation fuels. The topic has become particularly relevant as ethanol opponents continue to pressure legislators to eliminate ethanol subsidies. Growth Energy CEO Tom Buis said “it makes sense” to eliminate oil subsidies. “With the record high profits that these companies are seeing and the tremendous deficit that our nation is facing it certainly should be seriously considered,” he said.  

Renewable Fuels Association spokesman Matt Hartwig said oil subsidies deserve to be included in national energy agenda discussions. “Contrary to the beliefs of some, you can’t balance the budget by removing the blenders credit for ethanol and raising the price of gas for all Americans,” he said. “The ethanol industry has developed thoughtful, forward-looking policies to transform the current ethanol policies to meet both budget concerns and the needs of the industry. But the burden of revamping American energy policy should not be shouldered by renewable fuels alone.”

Senate Minority Leader Mitch McConnell, however, showed no signs of considering discussion to eliminate oil subsidies. In a press release, he called the president’s move counterproductive and predictable. “If someone in the administration can show me that raising taxes on American energy production will lower gas prices and create jobs, then I will gladly discuss it,” he stated. “But since nobody can, and the president’s letter to Congress doesn’t, this is merely an attempt to deflect from the policies of the past two years. If the president were truly serious about lowering the price of gas at the pump, he would open [domestic] areas to development, stop penalizing American job creation with new fees and tax hikes, and call an end to the anti-energy crusade at the [U.S.] Environmental Protection Agency.”