During a Senate finance committee hearing with American oil companies, Senator Orrin Hatch, Utah Republican and ranking member of the committee, asked the oil executives present if the price at the gas pump would rise if their companies were hit with higher taxes.
“Directionally, raising taxes on producers raises the cost of crude oil, and the cost of crude oil is the prime ingredient in the price of gasoline,” Chevron CEO John Watson explained. “So, raising our taxes will not reduce the price of gasoline.”
Democrats are looking to change oil American corporations’ tax status which would remove oil businesses’ tax deductions or what Democrats describe as “tax breaks.”
Marvin Odum, President of Shell Oil, agreed with Mr. Watson, saying: “The bigger point behind it is if the production here in the U.S.—either you don’t have access to it or its disadvantaged relative to other opportunities in the world that move somewhere else. Therefore, the jobs move somewhere else. The trade benefits move somewhere else. All the intended benefits go away as well. ”
The national gas average is currently $3.99 per gallon. Some areas, like Los Angeles, are seeing gas go as high as $4.99.
“No, I don’t believe, obviously, that raising taxes will lower prices. I do think the important thing is to have a competitive fiscal environment to attract investment. More investment can raise supply and have an effect on prices,” said Larry McKay of BP America.
“Raising taxes will lead to less investment, less production, and most likely higher cost per gallon and less employment,” James Mulva, CEO of Conoco Phillips noted to the committee.
Exxon Mobil CEO Rex Tillerson stressed the effect of higher taxes on oil businesses would effect U.S. refinery capacity and more dependence on imported oil.
“It’s going to have little immediate effect. The effect will come in months and years to come towards raising the costs of development here and if a loss on 199 deductions puts more pressure on refining margins,” Mr. Tillerson told Mr. Hatch. “Refineries already lose money most quarters. So if we lose more refinery capacity in the U.S., it means more imported product rather than refining product here.”