Little known fact: While most every other industry was falling to pieces last year, the oil industry posted record profits. ExxonMobil alone made $45 billion. So Obama, in his attempt to bolster the sinking U.S. economy, is likely not feeling too much sympathy for the industry as he goes after the clearly unnecessary tax credits the industry currently enjoys.
If you've read my previous post tracing big oil money in Washington, you might guess that all hell is breaking loose as a result. According to a recent Business Week report, the industry is flying their top brass to Washington and mustering a PR army that will target not only politicians but all the major press outlets with a 1-2 punch message -- eliminating tax breaks for the oil industry will result in the loss of millions of jobs and increased dependence on foreign oil.
First off, if the industry has just made record profits off the backs of hard-working Americans struggling to make ends meet (remember that $4 gallon of gas last year?) one would think they would have sufficient capital to hedge their own job losses and to invest in new wells, assuming it made financial sense to do so (which it doesn't). And to the point that the removal of the off-shore tax credit will increase dependence on foreign oil ... just not true.
Even if the industry could start tomorrow, it would not significantly increase supply for at least five years (optimistically) to 10 years (realistically) when the ocean rigs would go into full production. And at best, it is estimated that only 10-12 years worth of extractable oil is out there. So the enormous investment in infrastructure would never likely break even (unless of course the American public shoulders the burden).
Why then wouldn't we want to direct that money towards a solution that will provide long-term stability?
This is the question that Obama and the DOE are facing. For a fraction of the price, according to T. Boone Pickens who spoke last week at ECO:nomics summit, we could convert our trucking fleet to natural gas (which is cheap, abundant, burns cleaner and is domestically produced). That would buy time to develop technologies like biofuels and batteries, that could provide a long-term solution. And more importantly, we would be creating jobs in a growing industry rather than a dying one.
If you want to lend your hand in support of the President, you can sign a petition that Moveon.org is currently circulating called "Stop Subsidies for Big Oil."