WASHINGTON -- Democrats in the U.S. Senate on Wednesday unveiled a new energy package that would revoke $17 billion in tax breaks extended to big oil companies like Exxon Mobil Corp. and impose a 25% windfall profits tax on firms that do not invest in new energy sources. The Consumer-First Energy Act—assembled by Senate Majority Leader Harry Reid (D-Nev.) and other key Democrats—would also stop the U.S. Department of Energy from filling the Strategic Petroleum Reserve (SPR) until crude oil prices average $75 a barrel or less for 90 days. The bill seeks to lay the blame for record-high [image-nocss] gasoline prices on the Bush administration, "Big Oil" and OPEC, said Reuters.
The oil industry criticized the measure. "New taxes targeting the U.S. oil and natural gas industry would discourage investment in domestic fuel production," the American Petroleum Institute (API) said in a statement.
In a bill summary, Democrats point out that gasoline prices have more than doubled since President Bush took office in 2001, while "Big Oil" companies made more than $500 billion in profits over the same period.
"The Bush administration has led us down the path of the most significant energy crisis we have had in decades, if not in all time," Reid told reporters. "Big Oil is making money hand over fist while doing little to invest in alternative fuels yet Bush Republicans want to keep handing them huge tax breaks." (Click here to view a video of Reid unveiling the legislation.)
Republicans in the Senate in turn unveiled their own plan, which calls for new U.S. oil production in offshore areas as well as Alaska's Arctic National Wildlife Refuge (ANWR).
The Democratic bill seeks to revive a plan already passed by both the Senate and the House that would allow the federal government to sue the Organization of Petroleum Exporting Countries (OPEC)—source of one-third of global oil supply—for price manipulation. It also seeks to rein in speculation in oil markets, which Senate Democrats see as a prime mover behind crude oil prices which hit a record high of $123.80 a barrel on Wednesday.
The bill would prevent companies that trade U.S. oil futures from routing transactions through off-shore markets to evade position limits and requires the U.S. Commodity Futures Trading Commission to boost margin requirements for all oil futures transactions; however, CFTC chairman Walter Lukken told a Senate subcommittee on Wednesday that speculators were not behind the jump in oil prices, and he warned that higher margins would push energy trading off government-regulated exchanges. "I think there would be a migration off exchanges," said Lukken, adding that higher margins act like "a tax on traders." (Click here for his full testimony before the Subcommittee on Financial Services and General Government Committee on Appropriations.)
The bill would have to pass the Senate and be approved by the House and White House before becoming law.
Meanwhile, the Senate Judiciary Committee will hold a hearing later this month to examine the rising price of crude oil and its effect on gasoline prices across the country, Chairman Patrick Leahy (D-Vt.) said. In a hearing scheduled for May 21, the Judiciary Committee will examine how the price of crude oil affects the price consumers pay at gas stations across the country and around the world. Executives from some of the world's top players in the oil industry are expected to testify at the hearing. (Click here for Leahy's full press statement.)