Oil Company Incentives

OIL COMPANY INCENTIVES

Mr. WYDEN. Mr. President, most American companies make their profit by selling the best product at the best price. But too often in the oil industry it just doesn't seem to work that way. For example, oil companies can even get a subsidy from the Federal taxpayers for shutting down a profitable oil refinery by deducting the cost of that shutdown from their taxes.

I come to the floor today because I hope Congress will put a stop to the perverse incentives that reward oil companies when they reduce the supply of gasoline and gouge our consumers at the pump. In my view, the Tax Code simply should not reward companies that shut down a refinery to reduce the supply and drive up the price of gasoline. My own view is that Congress ought to be providing incentives to oil companies that increase their production, as long as they comply with the applicable environmental law.

I think we are all pleased when we see corporate profits go up, and we are all pleased when the stocks of those companies go up as well. But what I am troubled about with respect to what is going on in the oil industry-and we are going to see profits up again this week, and I gather some have already been announced-is that too often our consumers are getting hosed.

I have been traveling about Oregon over the last few weeks. I have watched as gasoline prices hit over $2 per gallon in some towns. In Eugene, Springfield, Medford, and Ashland-a number of our communities-the average price has been $2.06 per gallon. Each penny of that cost is coming out of the pockets of working Oregonians. It is, of course, helping to increase oil company profits. What I am troubled about is that the taxpayers at the same time are subsidizing practices that are detrimental to their interests.

There has clearly been a pattern of extraordinary profits in the oil industry. A prime example was ExxonMobil, which last year announced an all-time record earnings of $21.5 billion. That is not just the highest earnings ever recorded by an oil company; that is the highest by any company in history.

Again, I want it understood that I like to see our companies make profits. I like it when their stock prices are high. What I don't like is when the consumer has to subsidize anti-competitive practices that are detrimental to their interests. That has certainly been the case with respect to refineries, when an oil company gets an actual subsidy from the Federal taxpayers for shutting down a profitable refinery by deducting the cost of the shutdown from their taxes.

This matter has special implications out in the West. I see my friend from Nevada on the floor. He made an excellent presentation with respect to how his State is affected by gasoline prices. All of us in the West are going to be hit, and hit very hard, by Shell's decision to close its Bakersfield refinery. In that instance, there seems to be no evidence that Shell has gone out and aggressively tried to find a buyer.

Independent analysts have made it clear there is a substantial amount of oil in the area. I will tell you, for those of us in the West, looking at that refinery closure in Bakersfield, that deal smells. It just doesn't add up to have a profitable refinery going down at a time when the company doesn't look as if it is moving aggressively to find a buyer. There is oil in the area and, as I have pointed out, the taxpayer subsidizes the closures of these profitable refineries. Yet the Federal Trade Commission has refused to act.

I hope to be on the floor very shortly with a bipartisan effort to address the anti-consumer practices. At a minimum, let us not have the taxpayers of America subsidizing anti-competitive practices in the oil industry, such as the shutdown of profitable refineries.

Mr. REID. Will the Senator yield for a question?
Mr. WYDEN. I will be happy to yield.

Mr. REID. Last week, I gave a speech about what is going on in Nevada. In Nevada, we have gas prices now approaching $2.50 a gallon. If someone wants to put 4 gallons of gas in a vehicle, they have to bring a $10 bill with them to do that.

I ask my friend his comments on this: Senator Ensign and I asked the Federal Trade Commission to take a look at what was going on in Nevada. They took a look and came back and said: We can't tell you why the price is that high. It is unusual, is what they said. It is unusual and they could not determine why gas prices were that high.

Does the Senator agree, with the prices going haywire as they are, and the consumer being hit very hard, especially in the western part of the United States, that the Federal Trade Commission should do something more aggressively than what they have done?

Mr. WYDEN. The Senator from Nevada is correct. The fact is the Federal Trade Commission is AWOL on this issue. It has sent letters to all of us in the West saying they are concerned about the issue, but they have not been aggressive in standing up for the consumer.

I pointed out today that the oil companies ought to be rewarded financially when they take actions that benefit the consumer, not when they gouge the consumer. The consumers today are, in effect, getting fleeced from this unfair subsidy that is in the Tax Code when a profitable refinery goes down.

The Senator from Nevada is absolutely correct. The Federal Trade Commission, in my view, is just going through the motions. I think they hope somehow this issue is going to pass. All of us in the West-a part of the country where there is a very tight supply situation-understand this problem is not going away. I intend to join with the Senator from Nevada in trying to put the heat on the Federal Trade Commission.

Mr. REID. Mr. President, I would like to ask the Senator one more question. The Senator heard the remarks of the Senator from California saying that the Bush administration was actually doing nothing to look at the prices. In fact, the administration is in the Supreme Court today trying to keep secret its dealings with big oil.

The Senator would acknowledge that this administration, the President, and Vice President made their living-certainly part of their wealth they have accumulated-dealing with oil companies.

Does the Senator from Oregon acknowledge that the President has the bully pulpit and can certainly ask our so-called friends, Saudi Arabia and other countries, to stop cutting back the supply of oil but increase the supply of oil? Would that not also help, I repeat, the President putting whatever pressure he has-and that is significant-to tell the Saudis to start giving us more oil?

Mr. WYDEN. I agree fully with the Senator from Nevada. In fact, I submitted a resolution urging the President do that. In fact, my resolution mirrors the resolution that was drafted by our former colleagues, Spence Abraham and John Ashcroft, that passed in 2000 when President Clinton was faced with the same kind of situation.

I am very hopeful that the Senate will take up that resolution and do exactly as the Senator from Nevada has said.

I also point out that it was very striking, even before this debate about Mr. Woodward's book, that the Saudi Foreign Minister said recently when they cut production-and he was quoted on the news services saying that he was not even contacted by the Bush administration. He heard that the Bush administration was disappointed from the press, but he was not even contacted by the Bush administration.

If ever there were an administration that had earned some chips with the Saudis, given all that our country has done, this is an administration that has done so. I think the points made by the Senator from Nevada are extremely important.

Mr. President, I believe my time has expired. I yield the floor.
The ACTING PRESIDENT pro tempore. The Democratic leader.
Mr. DASCHLE. Mr. President, I will use my leader time.