On election night, Speaker Boehner said, “The American people have spoken and we have heard them”. Clearly, he heard voices, but it’s not the voices of the 74% of Americans who want the subsidies benefitting big oil repealed.
Do campaign contributions from oil companies affect economic policy more than the desires of the vast majority of American consumers? It looks that way. Let’s examine.
Campaign contributions by oil companies
If one wants to influence legislation, the first step is to make sure that the people passing laws are friendly to your cause (continuing subsidies and tax breaks for big oil). Monetary support goes a long way in making friends.
Oil companies are major players in the campaign contribution game. In 2010, they contributed a whopping $30 million dollars to influence the Congressional election according to records released by the Federal Election Commission. This is triple the amount spent by big oil in 1990. Of this, $17 million came from company executives, $13, million from oil Pacs, and $2 million in soft money.
Republicans received 77% of the money or $21.8 million, and Democrats $6.5 million or 23%. Big Oil contributed to 211 Democratic House candidates and 174 Republicans. The average contribution was $13,000 to the Democrats and $35,000 to Republicans. In the Senate, oil companies gave to 51 Democrats and 35 Republicans. Again, Republicans received an average of $60,000 almost twice what was given to Democrats.
When one looks closer, the average contribution figure does not tell the story. Oil companies gave major sums to certain key Senators who are “friends” of big oil, and much smaller amounts to others. For example, Senator Blanch Lincoln (D-AR), (who lost), received $453,000; Senator Vitter (R-LA) received $391,000, Senator Murkowski (R-AK) received $288,000 in 2010. There were 29 Senators, mostly Democrats, who received less than $2,000 each.
The same was true in the House. Oil gave over $100,000 each to 15 “friendly” members -- mostly Republicans – including Rep, Roy Blount of Missouri who received $382,000, and the rest received much less including fifty-three members, mostly Democrats, who received less than $2,000 each.
Why big oil companies contribute to political campaigns
Clearly, every special interest contributes money to candidates, not for good government, but for government that is good to them. Oil companies would not give to the extent they do unless they got a return on their investment.
It is difficult to make a direct connection between campaign contributions and oil company profits, but it is pretty clear that due to friendly government policies, tax breaks, and subsidies, oil companies have done quite well in the last decade benefiting far more than what they laid out in campaign contributions, realizing over a trillion dollars in profits.
What large oil companies get for their investment in campaign contributions
According to a staff report by the House Committee on Natural Resources, during the period between 2001 and 2010, oil companies gave $187 million in campaign contributions, and made $1 trillion in profits, yes trillion.
Exxon Mobile gave $5.7 million to members of Congress, and spent an additional $138 million in lobbying. In that same period, they received government contracts totaling $6.8 billion dollars and received several hundred million in subsidies. Their profits for the period 2001-2010 were $326 billion dollars and they paid no income tax in 2009.
Chevron in the same period contributed $4.4 million to campaigns, spent $92 lobbying, received government contracts of $2.6 billion, and received a tax refund of $19 million in 2009.
Conoco Phillips contributed $2.5 million, spent $63 million lobbying, and made $100 million in profits. BP made $158 million in profits in the same period. Shell did better making $222 in profits I the same time frame.
Then came the first quarter of 2011 when oil companies made record breaking profits up nearly 33% from the year before.
Correlation between oil profits and economic policy
There are a lot of reasons oil companies are profitable. One is simply their size. If they make only a penny on each gallon, they sell so many gallons it amounts to a lot of money. They make far more than a cent a gallon, however.
They make this profit in large part because they can write off so many expenses that they pay very little or no tax at all. They get subsidies and benefits from the federal government, as well as state and local governments. They are able to attract investors because the laws regarding passive investments are different for oil than for other industries. This attracts investors, raises stock prices, and gives them relatively cheap capital. They get these benefits from elected officials.
So, why do oil companies invest so much in campaigns? It pays off—for them.
Sources
Federal Election Commission
US House of Representatives Natural Resource Committee Democrat Staff Report
Open Secrets.Org
American Petroleum Institute (Oil Industry Association)
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