President Obama on Thursday called on Congress to end tax breaks for oil companies in a populist speech that sought to turn the blame for gas prices nearing $4 a gallon back onto his Republican critics.
In fiery, campaign-style remarks delivered from the Rose Garden, Obama told lawmakers that they can “stand with big oil companies, or they can stand with the American people.”
Senate Democrats followed by forcing a vote to end tax cuts for the five largest oil companies, which Republicans resoundingly defeated.
“With record profits and rising production, I’m not worried about the big oil companies,” Obama said. “I think it’s time they got by without more help from taxpayers who are having a tough enough time paying their bills and filling up their tanks.”
“And,” he added, “I think it’s curious that some of the folks in Congress who are the first to belittle investments in new sources of energy are the ones fighting the hardest to keep these giveaways for big oil companies.”
Obama raised the issue of rising gas prices outside the Beltway last week in a tour of four states important to domestic energy production — three of them in play for the November election.
In addition, the administration apparently has worked to arrange a global release of emergency petroleum reserves to reduce the price of oil, according to reports from French government officials.
On Thursday, French Prime Minister Francois Fillon said there was a “good chance” that the United States and Europe would tap their reserves.
The White House would not confirm the report, saying only that an emergency release is “on the table, but no decisions have been made and no specific actions have been proposed.”
The efforts underscore the political and economic vulnerability created by the increase in gas prices. Republicans hammered Democrats all week, arguing that Obama’s energy policy should move far more aggressively to encourage domestic production.
House Speaker John A. Boehner (R-Ohio) circulated independent research showing that increasing taxes on oil companies would likely increase prices for consumers.
In an e-mail to reporters, Boehner cited an analysis from the nonpartisan Congressional Research Service examining the effect of eliminating the subsidies.
“On what would likely be a small scale, the proposals . . . would make oil and natural gas more expensive for U.S. consumers and likely increase foreign dependence,” according to the analysis.
Teeing up the debate this week, Senate Democrats on Monday introduced a measure to end $24 billion in tax cuts and authorize new tax credits for alternative energy.
“Is this really the best we can do?” Senate Minority Leader Mitch McConnell (R-Ky.) asked before Thursday’s vote.
The measure ultimately failed — as expected — when 51 senators voted for cloture but 60 votes were needed to move to final passage.
The one short-term economic weapon in Obama’s arsenal may be tapping emergency oil reserves. The United States has 700 million barrels of crude sitting in its Strategic Petroleum Reserve, which is stored in salt caverns near the Gulf of Mexico. And the International Energy Agency, which advises 28 countries on energy issues, said Thursday that it is “ready to act if market conditions warrant.”
But experts are divided over whether now is the right time for countries to tap their strategic reserves. The reserves were designed to be used in the event of a severe supply disruption — and not merely to combat high prices.
The Strategic Petroleum Reserve has been tapped only three times in its 37-year history, first during Operation Desert Storm against Iraq under President George H.W. Bush, then during Hurricane Katrina in 2005, and again last year when civil war in Libya took about 2 percent of the world’s oil off the market.
“Those were all short-term, temporary disruptions,” said James Hamilton, an oil expert at the University of California at San Diego.
Right now, however, the main driver of high oil prices is tension with Iran, which is causing worry that there could be a bigger shock to supplies if a confrontation occurs.
“With Iran, we don’t know the endgame yet,” Hamilton said. “There are still too many uncertainties.”
Yet Iran is not the only issue buffeting the oil market. Global supplies remain tight, as conflicts in South Sudan, Yemen and Syria have taken at least 600,000 barrels of oil per day off the market. And Japan’s oil use is now at a four-year high as the country tries to replace electricity from the 53 nuclear reactors it has shut down since the Fukushima disaster.
“One could make the case that this is the sort of disruption that the Strategic Petroleum Reserve was built for,” oil analyst Philip Verleger said.
The biggest question of all, however, is how much of an impact on prices a strategic release would actually have.
In June 2011, the United States, Japan, South Korea and the European Union released 60 million barrels of oil after fighting in Libya had taken about 132 million barrels off the market.
On the day the release was announced, oil futures dropped $4, which translates into a roughly 10-cent reduction in the price of a gallon of gas. But some analysts say that oil was headed down anyway — and that the release had little long-term effect on prices.
For now, there seems to be disagreement among International Energy Agency countries as to whether to do this. Germany and Italy have said they are opposed to a release now. And although the United States and a few willing allies could go it alone, analysts say the countries would likely prefer to seek consensus.
Staff writers Scott Wilson and Ed O’Keefe contributed to this report.