Oil companies are spending millions of dollars on TV ads to protect the taxpayer subsidies they enjoy while their profits are soaring. President Obama asked Congress to repeal the subsidies, but the measure was defeated by the Republicans in the House despite polls showing 74% of Americans want to see the subsidies eliminated.
Oil company t.v. commercials
There are several types of oil company t.v. commercials running on both cable and network stations during prime time. These ads try to repair the damage the release of record-breaking profits has caused at a time of record high prices at the gas pump.
One oil company t.v. commercial depicts men purported to be businessmen who say that oil companies saved their businesses and they could not make it if they did not get the money that oil invested in their business. The text subtitles and the narrator explain how oil invests its profits in communities all across America creating jobs for small businesses. Click on the video to the left for an example of this type of misleading television commercial.
Another pro-oil company television ad has a narrator who tells viewers that oil companies “invest millions of its profits all across America for plumbers, electricians, other workers creating jobs, helping small business.” They claim oil companies have created 9.5 million jobs.
The third ad takes a different approach. It has a narrator who tells viewers that “Obama and his Congressional allies are trying to add new taxes to oil companies and block American oil production which will raise gas prices and kill jobs. It exhorts the viewers to call President Obama and tell him no new taxes on oil. The implication is that Obama is responsible for current gas prices because of these threatened new taxes and the alleged “blocking of most production” in the US.
The oil company t.v. commercials are misleading
The problem with these ads is that they are misleading. The first two ads are accurate in that oil companies do spend money in communities where they have exploration, drilling, or refining operations. Some of that money may go to small businesses; much of it goes to large businesses and companies headquartered outside the US. However, these expenditures are operating expenses meaning they are deducted before profit is calculated. The intent of the ad is to make people think that big oil is benevolent investing its profits buying products or hiring workers when in fact these expenses are deducted.
The second oil company ad is also misleading. First of all, it is true that Obama opposes opening up the Anwar wildlife reserve in Alaska to exploration (as do a majority of Americans according to polls), but it is not true that Obama has stopped oil production. In fact, after the moratorium that was imposed after the BP spill expired, the Obama administration has been issuing deep water permits at a rate greater than the previous administration, to the dismay of many environmentalists. Furthermore, there are millions of acres permitted for oil exploration and production that are not being used by the oil companies at all. In fact, domestic crude oil production this year has increased to the 2003 levels. So the statement about blocking oil production is misleading at best.
The ad is also misleading about the “new taxes” Obama is proposing. The President asked Congress to repeal the $4 billion a year in subsidies we give oil companies. He did not propose new taxes. They are playing on words. If the subsidies are rolled back, oil companies would not be able to deduct their production costs in the year they drill, but rather, amortize them the way other businesses do over the life of well. They would still get to deduct the costs and reduce taxes over time. They would also lose some additional write offs, but it is not a new tax, it just would require them to pay taxes they have been avoiding, and have them live by same rules as the small businesses they claim to support.
Why do oil companies run ads on television?
Oil companies have been posting high profits for years. In the first quarter of this year, their profits broke all records. At the same time, gasoline prices are also breaking record highs which are impacting our entire economy driving up the costs of food and goods consumers need, and impacting family budgets. This creates an atmosphere where voters may force Congress to roll back the subsidies or maybe pass other legislation to restrict Wall Street speculation in oil futures. They want to change the narrative to blame Obama and Democrats for gas high prices and paint themselves as saviors of small business. This is to head off any mass movement towards eliminating subsidies.
Perhaps they would get more sympathy from consumers if they diverted the cost of the ads into price relief at the pump.
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