No more welfare for oil companies? Obama calls for world to end subsidies

It has never been a secret that President Obama is no friend to the oil industry. His 2009 federal budget eliminated what he called, at the time, “oil company preferences.” The White House anticipates $12.7 billion in increased federal revenue during Obama’s first term, and an estimated $31.5 billion over the next decade, just from cutting handouts to oil companies.
But now he’s upped the ante, asking the rest of the world to do the same.
“Later this week, I will work with my colleagues at the G20 to phase out fossil fuel subsidies so that we can better address our climate challenge,” he said this morning at the United Nations Climate Change Summit in New York. “And already, we know that the recent drop in overall U.S. emissions is due in part to steps that promote greater efficiency and greater use of renewable energy.”
An International Energy Agency study partially leaked on Monday found that greenhouse gas emissions have fallen recently by the largest margin recorded, largely because of reduced manufacturing caused by the global recession, but in part because of increased regulation, especially of coal-burning power plants. The full extent of the reduction is expected to be announced later this month.
Obama’s call to slash support for the oil industry is sure to enrage at least two groups: the oil industry and the Saudis.
“With America in the midst of an economic recession, now is not the time to impose new taxes on the nation’s oil and natural gas industry,” Jack Gerard, president of the American Petroleum Instiitute, said when Obama proposed cutting the U.S. subsidies in February. Obama’s budget included an excise tax on oil drilling that restored royalty payments the Bush Administration had eliminated from off-shore drilling sites in the Gulf of Mexico.
Earlier this month, Saudi Prince Turki al-Faisal published an article arguing that the U.S. and other nations should recognize their dependence on oil and give up their renewable energy folly.
“There is no technology on the horizon which can replace oil to satisfy colossal needs of U.S. industry, transport and armed forces. Any future scenario will be characterized by mix of renewable and non-renewable energies whether you like it or not,” Turki said.
Exxon-Mobile Corp. earned $1,300 per second in 2007, setting a record for American companies with its $40.6 billion profit that year. Last year, it broke the record, reaching $45.2 billion. Those numbers followed a series of record years for the industry, 2001-2006, during which oil companies accumulated $120 billion in what the Consumer Federation of America calls “excess profits” because they exceeded the profitability standard set by other American industries.
During these years, which coincided with the Bush Administration, the oil industry enjoyed tax cuts, deductions, and exemptions from royalties owed the public worth $2-3 billion per year.