Obama calls for end to ‘subsidies’ for US energy sector

26 April 2011 19:45  [Source: ICIS news]

WASHINGTON (ICIS)--President Barack Obama on Tuesday called on Congress to eliminate what he termed “wasteful subsidies” for the oil and gas industry in order to offset rising US retail gasoline prices, a policy quickly challenged by refiners.

In a letter to Republican and Democrat leaders in the House and Senate, Obama said that “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”.

“One of those steps,” Obama said, “is to eliminate unwarranted tax breaks to the oil and gas industry and invest that revenue into clean energy to reduce our dependence on foreign oil.”

Obama also said that as his administration and Congress work to reduce federal budget deficits and the national debt, “we simply can’t afford these wasteful subsidies” to the US energy sector.

According to the Department of Energy (DOE), US gasoline prices have been increasing more or less steadily since Obama took office in January 2009, climbing from an average cost of $1.79/gal then to $3.88/gal this week - more than double.

In some areas of the country, gasoline prices are at $4.00/gal and higher. Average prices at the pump have gained more than a dollar just since November last year, according to DOE.

However, US refining industry officials dispute the president’s characterisation of energy subsidies.

“We don’t get subsidies,” said Charles Drevna, president of the National Petrochemical & Refiners Association (NPRA). 

“Like all other manufacturers, we get a tax credit for investments we make,” he said.  “You get that tax credit whether you make gasoline or donuts, but these are not subsidies.”

He described as “discriminatory” policies sought by the president and some in Congress to eliminate the tax credits only for the energy industry.

Drevna said that American consumers “are not benefitting by President Obama’s continuing attacks on American companies that produce oil and natural gas and that manufacturer fuels and petrochemicals”.

“While these attacks may be good politics in the view of some, they make it harder for these companies to serve the American people with proven, reliable and affordable products,” he added.

Drevna said that “the most effective action the federal government could take to help American consumers deal with high energy costs would be to allow increased use of our own abundant domestic energy resources”. 

He also called on the administration to “lift burdensome environmental regulations that destroy jobs, keep us reliant on foreign energy supplies and have no real environmental benefit”. 

Along with a broad coalition of other energy and manufacturing interests, the NPRA has opposed the Obama administration’s ongoing programme to limit US industrial emissions of greenhouse gases, warning that the resulting increase in overall energy costs would undermine the US economy.

US energy sector officials also have accused the Obama administration of purposely restricting development of domestic US oil and gas resources while subsidizing alternative and renewable sectors such as corn ethanol, wind and solar farms.

Obama has previously sought cancellation of manufacturing tax credits for the oil and gas industry in two earlier budget proposals, but Congress refused to go along.

($1 = €0.69)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Joe Kamalick
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